UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2022~~September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to ___________________________

Commission file number 001-39510

STEPSTONE GROUP INC.

(Exact name of Registrant as specified in its charter)


Delaware						84-3868757
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~450 Lexington~~ 277 Park Avenue, ~~31st~~45th Floor
New York, NY						~~10017~~10172
(Address of principal executive offices)						(Zip Code)

(212) 351-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

STEP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of ~~February 7,~~November 3, 2023, there were ~~62,772,922~~64,068,952 shares of the registrant’s Class A common stock, par value $0.001, and ~~46,420,141~~46,314,543 shares of the registrant’s Class B common stock, par value $0.001, outstanding.

Table of Contents


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022~~2023			5
Condensed Consolidated Statements of Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 and ~~2021~~2022			7
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 and ~~2021~~2022			8
Condensed Consolidated Statements of Stockholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 and ~~2021~~2022			9
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 and ~~2021~~2022			11
Notes to Condensed Consolidated Financial Statements			13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			4743
Item 3. Qualitative and Quantitative Disclosures about Market Risk			8176
Item 4. Controls and Procedures			8378
PART II - OTHER INFORMATION
Item 1. Legal Proceedings			8479
Item 1A. Risk Factors			8479
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			8479
Item 3. Defaults Upon Senior Securities			8479
Item 4. Mine Safety Disclosures			8479
Item 5. Other Information			8479
Item 6. Exhibits			8680
Signatures			8781

This quarterly report on Form 10-Q (“Form 10-Q”) includes certain information regarding the historical investment performance of our focused commingled funds and separately managed accounts. An investment in shares of our Class A common stock is not an investment in any StepStone Fund (as defined below). The StepStone Funds are separate, distinct legal entities that are not our subsidiaries. In the event of our bankruptcy or liquidation, you will have no claim against the StepStone Funds. In considering the performance information relating to the StepStone Funds contained herein, current and prospective Class A common stockholders should bear in mind that the performance of the StepStone Funds is not indicative of the possible performance of shares of our Class A common stock and also is not necessarily indicative of the future results of the StepStone Funds, even if fund investments were in fact liquidated on the dates indicated, and we cannot assure you that the StepStone Funds will continue to achieve, or that future StepStone Funds will achieve, comparable results.

Unless otherwise indicated or the context otherwise requires:

• “StepStone Group Inc.” or “SSG” refers solely to StepStone Group Inc., a Delaware corporation, and not to any of its subsidiaries;

• the “Partnership” refers solely to StepStone Group LP, a Delaware limited partnership, and not to any of its subsidiaries;

• “General Partner” refers to StepStone Group Holdings LLC, a Delaware limited liability company, and the sole general partner of the Partnership;

• “we,” “us,” “our,” the “Company,” “our company,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership;

• “StepStone Funds” or “our funds” refer to our focused commingled funds and our separately managed accounts, including acquired Greenspring funds, for which we act as both investment adviser and general partner or managing member;

• references to the “Greenspring acquisition” refer to the acquisition of Greenspring Associates, Inc. and certain of its affiliates (“Greenspring”) that was completed on September 20, 2021;

• references to “FY,” “fiscal” or “fiscal year” are to the fiscal year ended March 31 of the applicable year;

• references to the “Reorganization” refer to the series of transactions immediately before the Company’s initial public offering (“IPO”), which was completed on September 18, 2020;

• references to “private markets allocations” or “total capital responsibility” refer to the aggregate amount of our assets under management (“AUM”) and our assets under advisement (“AUA”);

• references to “high-net-worth” individuals refer to individuals with net worth of over $5 million, excluding primary residence;

• references to “mass affluent” individuals refer to individuals with annual income over $200,000 or net worth between $1 million and $5 million, excluding primary residence; and

• references to “Consolidated Funds” refer to the StepStone Funds that we are required to consolidate as of the applicable reporting period.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our solutions. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position made in this Form 10-Q are forward-looking. We use words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “may,” “plan” and “will” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current plans, estimates and expectations and are inherently uncertain. The inclusion of any forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated will be achieved. Forward-looking statements are subject to various risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, global and domestic market and business conditions, our successful execution of business and growth strategies and regulatory factors relevant to our business, as well as assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity and the risks and uncertainties described in greater detail under “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended March 31, ~~2022~~2023 and in our subsequent reports filed from time to time with the U.S. Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q and in our other periodic filings. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

StepStone Group Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	120,093	$	116,386	Cash and cash equivalents	$	117,484	$	102,565
Restricted cash	Restricted cash	971		1,063		Restricted cash	679		955
Fees and accounts receivable	Fees and accounts receivable	42,769		34,141		Fees and accounts receivable	45,237		44,450
Due from affiliates	Due from affiliates	35,749		19,369		Due from affiliates	51,050		54,322
Investments:	Investments:					Investments:
Investments in funds	Investments in funds	109,102		107,045		Investments in funds	129,768		115,187
Accrued carried interest allocations	Accrued carried interest allocations	1,126,386		1,480,515		Accrued carried interest allocations	1,331,778		1,227,173
Legacy Greenspring investments in funds and accrued carried interest allocations(1)	Legacy Greenspring investments in funds and accrued carried interest allocations(1)	888,872		1,334,581		Legacy Greenspring investments in funds and accrued carried interest allocations(1)	700,473		770,652
Deferred income tax assets	Deferred income tax assets	49,245		27,866		Deferred income tax assets	36,828		44,358
Lease right-of-use assets, net	Lease right-of-use assets, net	104,767		61,065		Lease right-of-use assets, net	99,843		101,130
Other assets and receivables	Other assets and receivables	44,013		27,426		Other assets and receivables	52,615		44,060
Intangibles, net	Intangibles, net	365,515		398,126		Intangibles, net	333,322		354,645
Goodwill	Goodwill	580,542		580,542		Goodwill	580,542		580,542
Assets of Consolidated Funds:	Assets of Consolidated Funds:					Assets of Consolidated Funds:
Cash and cash equivalents	Cash and cash equivalents	19,967		—		Cash and cash equivalents	58,639		25,997
Investments, at fair value	Investments, at fair value	14,312		—		Investments, at fair value	68,481		30,595
Other assets	Other assets	839		—		Other assets	1,624		772
Total assets	Total assets	$	3,503,142	$	4,188,125	Total assets	$	3,608,363	$	3,497,403
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	83,659	$	80,541	Accounts payable, accrued expenses and other liabilities	$	91,561	$	89,396
Accrued compensation and benefits	Accrued compensation and benefits	78,925		39,966		Accrued compensation and benefits	110,413		66,614
Accrued carried interest-related compensation	Accrued carried interest-related compensation	597,298		769,988		Accrued carried interest-related compensation	697,377		644,517
Legacy Greenspring accrued carried interest-related compensation(1)	Legacy Greenspring accrued carried interest-related compensation(1)	723,527		1,140,101		Legacy Greenspring accrued carried interest-related compensation(1)	556,219		617,994
Due to affiliates	Due to affiliates	201,352		199,355		Due to affiliates	204,503		205,424
Lease liabilities	Lease liabilities	124,318		70,965		Lease liabilities	119,117		121,224
Debt obligations	Debt obligations	83,233		62,879		Debt obligations	123,586		98,351
Liabilities of Consolidated Funds:	Liabilities of Consolidated Funds:					Liabilities of Consolidated Funds:
Other liabilities	Other liabilities	647		—		Other liabilities	7,904		566
Total liabilities	Total liabilities	1,892,959		2,363,795		Total liabilities	1,910,680		1,844,086
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 14)						Commitments and contingencies (Note 14)
Redeemable non-controlling interests in Consolidated Funds	Redeemable non-controlling interests in Consolidated Funds	4,966		—		Redeemable non-controlling interests in Consolidated Funds	59,272		24,530
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:

Class A common stock, $0.001 par value, 650,000,000 authorized; 62,772,922 and 61,141,306 issued and outstanding as of December 31, 2022 and March 31, 2022, respectively		63		61
Class B common stock, $0.001 par value, 125,000,000 authorized; 46,420,141 and 47,149,673 issued and outstanding as of December 31, 2022 and March 31, 2022, respectively		46		48
Class A common stock, $0.001 par value, 650,000,000 authorized; 64,068,952 and 62,834,791 issued and outstanding as of September 30, 2023 and March 31, 2023, respectively						Class A common stock, $0.001 par value, 650,000,000 authorized; 64,068,952 and 62,834,791 issued and outstanding as of September 30, 2023 and March 31, 2023, respectively	64		63
Class B common stock, $0.001 par value, 125,000,000 authorized; 46,314,543 and 46,420,141 issued and outstanding as of September 30, 2023 and March 31, 2023, respectively						Class B common stock, $0.001 par value, 125,000,000 authorized; 46,314,543 and 46,420,141 issued and outstanding as of September 30, 2023 and March 31, 2023, respectively	46		46
Additional paid-in capital	Additional paid-in capital	606,497		587,243		Additional paid-in capital	628,977		610,567
Retained earnings	Retained earnings	144,500		229,615		Retained earnings	165,240		160,430
Accumulated other comprehensive income	Accumulated other comprehensive income	610		658		Accumulated other comprehensive income	338		461
Total StepStone Group Inc. stockholders’ equity	Total StepStone Group Inc. stockholders’ equity	751,716		817,625		Total StepStone Group Inc. stockholders’ equity	794,665		771,567
Non-controlling interests in subsidiaries	Non-controlling interests in subsidiaries	34,311		32,063		Non-controlling interests in subsidiaries	30,394		36,380
Non-controlling interests in legacy Greenspring entities(1)	Non-controlling interests in legacy Greenspring entities(1)	165,345		194,480		Non-controlling interests in legacy Greenspring entities(1)	144,255		152,658
Non-controlling interests in the Partnership	Non-controlling interests in the Partnership	653,845		780,162		Non-controlling interests in the Partnership	669,097		668,182
Total stockholders’ equity	Total stockholders’ equity	1,605,217		1,824,330		Total stockholders’ equity	1,638,411		1,628,787
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,503,142	$	4,188,125	Total liabilities and stockholders’ equity	$	3,608,363	$	3,497,403

(1)Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. See ~~notes~~note 5 ~~and 14~~ for more information.

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

The following presents the portion of the condensed consolidated balances presented above attributable to consolidated variable interest entities.


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	34,695	$	19,386	Cash and cash equivalents	$	35,682	$	25,959
Restricted cash	Restricted cash	971		1,063		Restricted cash	679		955
Fees and accounts receivable	Fees and accounts receivable	38,999		29,060		Fees and accounts receivable	42,128		39,996
Due from affiliates	Due from affiliates	7,517		5,252		Due from affiliates	15,167		14,061
Investments in funds	Investments in funds	28,242		22,808		Investments in funds	35,541		31,569
Legacy Greenspring investments in funds and accrued carried interest allocations	Legacy Greenspring investments in funds and accrued carried interest allocations	888,872		1,334,581		Legacy Greenspring investments in funds and accrued carried interest allocations	700,473		770,652
Deferred income tax assets	Deferred income tax assets	316		301		Deferred income tax assets	573		451
Lease right-of-use assets, net	Lease right-of-use assets, net	16,447		17,206		Lease right-of-use assets, net	15,748		15,084
Other assets and receivables	Other assets and receivables	5,999		5,588		Other assets and receivables	9,111		8,101
Assets of Consolidated Funds:	Assets of Consolidated Funds:					Assets of Consolidated Funds:
Cash and cash equivalents	Cash and cash equivalents	19,967		—		Cash and cash equivalents	58,639		25,997
Investments, at fair value	Investments, at fair value	14,312		—		Investments, at fair value	68,481		30,595
Other assets	Other assets	839		—		Other assets	1,624		772
Total assets	Total assets	$	1,057,176	$	1,435,245	Total assets	$	983,846	$	964,192

Liabilities	Liabilities					Liabilities
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	11,883	$	8,548	Accounts payable, accrued expenses and other liabilities	$	19,542	$	13,444
Accrued compensation and benefits	Accrued compensation and benefits	33,875		14,806		Accrued compensation and benefits	47,730		29,869
Legacy Greenspring accrued carried interest-related compensation	Legacy Greenspring accrued carried interest-related compensation	723,527		1,140,101		Legacy Greenspring accrued carried interest-related compensation	556,219		617,994
Due to affiliates	Due to affiliates	70		190		Due to affiliates	5,581		4,962
Lease liabilities	Lease liabilities	17,376		17,593		Lease liabilities	16,319		15,883
Liabilities of Consolidated Funds:	Liabilities of Consolidated Funds:					Liabilities of Consolidated Funds:
Other liabilities	Other liabilities	647		—		Other liabilities	7,904		566
Total liabilities	Total liabilities	$	787,378	$	1,181,238	Total liabilities	$	653,295	$	682,718

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Income (Loss) (Unaudited)

(in thousands, except share and per share amounts)


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues									Revenues
Management and advisory fees, net	Management and advisory fees, net	$	128,753	$	106,384	$	364,606	$	268,028	Management and advisory fees, net	$	142,123	$	119,121	$	280,238	$	235,853
Performance fees:	Performance fees:									Performance fees:
Incentive fees	Incentive fees	2,980		27		8,345		6,005		Incentive fees	4,946		5,365		4,952		5,365
Carried interest allocations:	Carried interest allocations:									Carried interest allocations:
Realized	Realized	16,320		66,559		112,396		169,053		Realized	1,585		22,469		16,058		96,076
Unrealized	Unrealized	(63,367)		132,535		(354,095)		452,789		Unrealized	55,371		(176,778)		104,735		(290,728)
Total carried interest allocations	Total carried interest allocations	(47,047)		199,094		(241,699)		621,842		Total carried interest allocations	56,956		(154,309)		120,793		(194,652)
Legacy Greenspring carried interest allocations(1)	Legacy Greenspring carried interest allocations(1)	(88,921)		104,960		(371,200)		104,960		Legacy Greenspring carried interest allocations(1)	(12,603)		(128,672)		(36,550)		(282,279)
Total performance fees										Total performance fees	49,299		(277,616)		89,195		(471,566)
Total revenues	Total revenues	(4,235)		410,465		(239,948)		1,000,835		Total revenues	191,422		(158,495)		369,433		(235,713)
Expenses	Expenses									Expenses
Compensation and benefits:	Compensation and benefits:									Compensation and benefits:
Cash-based compensation	Cash-based compensation	62,628		51,665		182,190		138,217		Cash-based compensation	74,851		59,501		144,932		119,562
Equity-based compensation	Equity-based compensation	8,108		3,407		15,605		10,363		Equity-based compensation	5,916		3,783		14,388		7,497
Performance fee-related compensation:	Performance fee-related compensation:									Performance fee-related compensation:
Realized	Realized	11,726		34,033		67,091		86,122		Realized	1,720		13,630		10,822		55,365
Unrealized	Unrealized	(31,875)		68,368		(172,554)		228,146		Unrealized	28,712		(86,126)		52,923		(140,679)
Total performance fee-related compensation	Total performance fee-related compensation	(20,149)		102,401		(105,463)		314,268		Total performance fee-related compensation	30,432		(72,496)		63,745		(85,314)
Legacy Greenspring performance fee-related compensation(1)	Legacy Greenspring performance fee-related compensation(1)	(88,921)		104,960		(371,200)		104,960		Legacy Greenspring performance fee-related compensation(1)	(12,603)		(128,672)		(36,550)		(282,279)
Total compensation and benefits	Total compensation and benefits	(38,334)		262,433		(278,868)		567,808		Total compensation and benefits	98,596		(137,884)		186,515		(240,534)
General, administrative and other	General, administrative and other	43,582		30,299		111,547		72,049		General, administrative and other	31,729		33,733		65,006		67,965

Total expenses	Total expenses	5,248		292,732		(167,321)		639,857		Total expenses	130,325		(104,151)		251,521		(172,569)
Other income (expense)	Other income (expense)									Other income (expense)
Investment income (loss)	Investment income (loss)	(681)		7,230		(5,473)		20,841		Investment income (loss)	3,080		(3,691)		6,166		(4,792)
Legacy Greenspring investment income (loss)(1)		(8,966)		17,890		(32,927)		17,890
Legacy Greenspring investment loss(1)										Legacy Greenspring investment loss(1)	(3,966)		(15,357)		(6,832)		(23,961)
Investment income of Consolidated Funds	Investment income of Consolidated Funds	4,895		—		4,895		—		Investment income of Consolidated Funds	8,772		—		11,134		—
Interest income	Interest income	701		43		1,068		329		Interest income	977		356		1,408		367
Interest expense	Interest expense	(1,111)		(543)		(2,515)		(637)		Interest expense	(2,108)		(817)		(4,120)		(1,404)
Other income (loss)		358		(273)		(1,380)		(2,662)
Other loss										Other loss	(872)		(634)		(645)		(1,738)
Total other income (expense)	Total other income (expense)	(4,804)		24,347		(36,332)		35,761		Total other income (expense)	5,883		(20,143)		7,111		(31,528)
Income (loss) before income tax	Income (loss) before income tax	(14,287)		142,080		(108,959)		396,739		Income (loss) before income tax	66,980		(74,487)		125,023		(94,672)
Income tax expense (benefit)	Income tax expense (benefit)	(732)		15,787		(6,868)		16,065		Income tax expense (benefit)	7,729		(7,422)		16,326		(6,136)
Net income (loss)	Net income (loss)	(13,555)		126,293		(102,091)		380,674		Net income (loss)	59,251		(67,065)		108,697		(88,536)
Less: Net income attributable to non-controlling interests in subsidiaries	Less: Net income attributable to non-controlling interests in subsidiaries	9,575		7,091		25,836		18,737		Less: Net income attributable to non-controlling interests in subsidiaries	9,615		8,690		19,245		16,261
Less: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities(1)		(8,966)		17,890		(32,927)		17,890
Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1)										Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1)	(3,966)		(15,357)		(6,832)		(23,961)
Less: Net income (loss) attributable to non-controlling interests in the Partnership	Less: Net income (loss) attributable to non-controlling interests in the Partnership	(7,617)		52,966		(48,192)		191,977		Less: Net income (loss) attributable to non-controlling interests in the Partnership	22,928		(31,177)		42,788		(40,575)
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds	Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds	391		—		391		—		Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds	4,449		—		6,002		—
Net income (loss) attributable to StepStone Group Inc.	Net income (loss) attributable to StepStone Group Inc.	$	(6,938)	$	48,346	$	(47,199)	$	152,070	Net income (loss) attributable to StepStone Group Inc.	$	26,225	$	(29,221)	$	47,494	$	(40,261)

Net income (loss) per share of Class A common stock:	Net income (loss) per share of Class A common stock:									Net income (loss) per share of Class A common stock:
Basic	Basic	$	(0.11)	$	0.84	$	(0.77)	$	3.29	Basic	$	0.42	$	(0.48)	$	0.76	$	(0.66)
Diluted	Diluted	$	(0.11)	$	0.83	$	(0.77)	$	3.22	Diluted	$	0.42	$	(0.48)	$	0.75	$	(0.66)
Weighted-average shares of Class A common stock:	Weighted-average shares of Class A common stock:									Weighted-average shares of Class A common stock:
Basic	Basic	62,192,899		57,875,758		61,583,215		46,247,353		Basic	62,858,468		61,407,834		62,846,708		61,276,707
Diluted	Diluted	62,192,899		61,483,233		61,583,215		50,118,482		Diluted	66,198,129		61,407,834		65,970,053		61,276,707

(1)Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. See notes 3 5 and 145 for more information.

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income (loss)	Net income (loss)	$	(13,555)	$	126,293	$	(102,091)	$	380,674	Net income (loss)	$	59,251	$	(67,065)	$	108,697	$	(88,536)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(240)		(155)		(179)		236		Foreign currency translation adjustment	(367)		286		(445)		61

Total other comprehensive income (loss)	Total other comprehensive income (loss)	(240)		(155)		(179)		236		Total other comprehensive income (loss)	(367)		286		(445)		61
Comprehensive income (loss) before non-controlling interests	Comprehensive income (loss) before non-controlling interests	(13,795)		126,138		(102,270)		380,910		Comprehensive income (loss) before non-controlling interests	58,884		(66,779)		108,252		(88,475)
Less: Comprehensive income attributable to non-controlling interests in subsidiaries	Less: Comprehensive income attributable to non-controlling interests in subsidiaries	9,457		7,014		25,748		18,856		Less: Comprehensive income attributable to non-controlling interests in subsidiaries	9,444		8,831		19,035		16,291
Less: Comprehensive income (loss) attributable to non-controlling interests in legacy Greenspring entities		(8,966)		17,890		(32,927)		17,890
Less: Comprehensive loss attributable to non-controlling interests in legacy Greenspring entities										Less: Comprehensive loss attributable to non-controlling interests in legacy Greenspring entities	(3,966)		(15,357)		(6,832)		(23,961)
Less: Comprehensive income (loss) attributable to non-controlling interests in the Partnership	Less: Comprehensive income (loss) attributable to non-controlling interests in the Partnership	(7,671)		52,925		(48,232)		192,049		Less: Comprehensive income (loss) attributable to non-controlling interests in the Partnership	22,842		(31,112)		42,685		(40,561)
Less: Comprehensive income attributable to redeemable non-controlling interests in Consolidated Funds	Less: Comprehensive income attributable to redeemable non-controlling interests in Consolidated Funds	391		—		391		—		Less: Comprehensive income attributable to redeemable non-controlling interests in Consolidated Funds	4,449		—		6,002		—
Comprehensive income (loss) attributable to StepStone Group Inc.	Comprehensive income (loss) attributable to StepStone Group Inc.	$	(7,006)	$	48,309	$	(47,250)	$	152,115	Comprehensive income (loss) attributable to StepStone Group Inc.	$	26,115	$	(29,141)	$	47,362	$	(40,244)

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)


		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in Subsidiaries		Non-Controlling Interests in Legacy Greenspring Entities		Non-Controlling Interests in the Partnership		Total Stockholders’ Equity			Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in Subsidiaries		Non-Controlling Interests in Legacy Greenspring Entities		Non-Controlling Interests in the Partnership		Total Stockholders’ Equity
Balance at September 30, 2022		$	62	$	47	$	596,355	$	164,044	$	671	$	28,922	$	173,443	$	677,565	$	1,641,109
Balance at June 30, 2023																				Balance at June 30, 2023	$	63	$	46	$	612,799	$	152,612	$	439	$	37,678	$	151,916	$	672,990	$	1,628,543
Net income (loss)	Net income (loss)	—		—		—		(6,938)		—		9,575		(8,966)		(7,617)		(13,946)		Net income (loss)	—		—		—		26,225		—		9,615		(3,966)		22,928		54,802
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(68)		(118)		—		(54)		(240)		Other comprehensive loss	—		—		—		—		(110)		(171)		—		(86)		(367)
Contributed capital	Contributed capital	—		—		—		—		—		142		1,849		20		2,011		Contributed capital	—		—		—		—		—		—		2,007		—		2,007
Equity-based compensation	Equity-based compensation	—		—		2,259		—		—		252		—		1,797		4,308		Equity-based compensation	—		—		2,564		—		—		149		—		1,996		4,709
Distributions	Distributions	—		—		—		—		—		(4,463)		(981)		(8,908)		(14,352)		Distributions	—		—		—		—		—		(15,532)		(5,702)		(17,615)		(38,849)

Dividends declared	Dividends declared	—		—		—		(12,606)		—		—		—		—		(12,606)		Dividends declared	—		—		—		(13,597)		—		—		—		—		(13,597)

Vesting of RSUs, net of shares withheld for employee taxes																				Vesting of RSUs, net of shares withheld for employee taxes	—		—		(345)		—		—		—		—		(268)		(613)

Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	1		(1)		(1)		—		—		—		—		—		(1)		Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	1		—		(1)		—		—		—		—		—		—

Sale of non-controlling interests																				Sale of non-controlling interests	—		—		851		—		—		1,553		—		641		3,045
Equity reallocation between controlling and non-controlling interests	Equity reallocation between controlling and non-controlling interests	—		—		8,950		—		7		1		—		(8,958)		—		Equity reallocation between controlling and non-controlling interests	—		—		14,378		—		9		(2,898)		—		(11,489)		—
Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(1,066)		—		—		—		—		—		(1,066)		Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(1,269)		—		—		—		—		—		(1,269)
Balance at December 31, 2022		$	63	$	46	$	606,497	$	144,500	$	610	$	34,311	$	165,345	$	653,845	$	1,605,217
Balance at September 30, 2023																				Balance at September 30, 2023	$	64	$	46	$	628,977	$	165,240	$	338	$	30,394	$	144,255	$	669,097	$	1,638,411

Balance at March 31, 2022		$	61	$	48	$	587,243	$	229,615	$	658	$	32,063	$	194,480	$	780,162	$	1,824,330
Balance at March 31, 2023																				Balance at March 31, 2023	$	63	$	46	$	610,567	$	160,430	$	461	$	36,380	$	152,658	$	668,182	$	1,628,787
Net income (loss)	Net income (loss)	—		—		—		(47,199)		—		25,836		(32,927)		(48,192)		(102,482)		Net income (loss)	—		—		—		47,494		—		19,245		(6,832)		42,788		102,695
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(51)		(88)		—		(40)		(179)		Other comprehensive loss	—		—		—		—		(132)		(210)		—		(103)		(445)
Contributed capital	Contributed capital	—		—		—		—		—		142		10,634		37		10,813		Contributed capital	—		—		—		—		—		—		4,585		28		4,613
Equity-based compensation	Equity-based compensation	—		—		6,385		—		—		260		—		5,160		11,805		Equity-based compensation	—		—		5,075		—		—		296		—		3,951		9,322
Distributions	Distributions	—		—		—		—		—		(23,903)		(6,842)		(63,254)		(93,999)		Distributions	—		—		—		—		—		(23,972)		(6,156)		(34,888)		(65,016)

Dividends declared	Dividends declared	—		—		—		(37,916)		—		—		—		—		(37,916)		Dividends declared	—		—		—		(42,684)		—		—		—		—		(42,684)
Vesting of RSUs, net of shares withheld for employee taxes	Vesting of RSUs, net of shares withheld for employee taxes	—		—		(1,504)		—		—		—		—		(1,203)		(2,707)		Vesting of RSUs, net of shares withheld for employee taxes	—		—		(345)		—		—		—		—		(268)		(613)

Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	2		(2)		(1)		—		—		—		—		—		(1)		Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares	1		—		(1)		—		—		—		—		—		—

Sale of non-controlling interests																				Sale of non-controlling interests	—		—		851		—		—		1,553		—		641		3,045

Equity reallocation between controlling and non-controlling interests	Equity reallocation between controlling and non-controlling interests	—		—		18,821		—		3		1		—		(18,825)		—		Equity reallocation between controlling and non-controlling interests	—		—		14,123		—		9		(2,898)		—		(11,234)		—
Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(4,447)		—		—		—		—		—		(4,447)		Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(1,293)		—		—		—		—		—		(1,293)
Balance at December 31, 2022		$	63	$	46	$	606,497	$	144,500	$	610	$	34,311	$	165,345	$	653,845	$	1,605,217
Balance at September 30, 2023																				Balance at September 30, 2023	$	64	$	46	$	628,977	$	165,240	$	338	$	30,394	$	144,255	$	669,097	$	1,638,411

(1)See notes 10 13 and 1413 for more information.

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)


		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in Subsidiaries		Non-Controlling Interests in Legacy Greenspring Entities		Non-Controlling Interests in the Partnership		Total Stockholders’ Equity			Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in Subsidiaries		Non-Controlling Interests in Legacy Greenspring Entities		Non-Controlling Interests in the Partnership		Total Stockholders’ Equity
Balance at September 30, 2021		$	56	$	53	$	525,118	$	158,131	$	268	$	24,558	$	219,086	$	804,483	$	1,731,753
Net income		—		—		—		48,346		—		7,091		17,890		52,966		126,293
Balance at June 30, 2022																				Balance at June 30, 2022	$	61	$	48	$	593,159	$	205,946	$	586	$	31,829	$	187,365	$	730,381	$	1,749,375
Net income (loss)																				Net income (loss)	—		—		—		(29,221)		—		8,690		(15,357)		(31,177)		(67,065)
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(37)		(77)		—		(41)		(155)		Other comprehensive loss	—		—		—		—		80		141		—		65		286
Contributed capital	Contributed capital	—		—		—		—		—		—		9,141		23		9,164		Contributed capital	—		—		—		—		—		—		3,798		17		3,815
Equity-based compensation	Equity-based compensation	—		—		1,771		—		—		4		—		1,632		3,407		Equity-based compensation	—		—		2,087		—		—		4		—		1,692		3,783
Distributions	Distributions	—		—		—		—		—		(3,005)		(4,624)		(15,649)		(23,278)		Distributions	—		—		—		—		—		(11,742)		(2,363)		(16,847)		(30,952)

Dividends declared	Dividends declared	—		—		—		(9,255)		—		—		—		—		(9,255)		Dividends declared	—		—		—		(12,681)		—		—		—		—		(12,681)

Vesting of RSUs, net of shares withheld for employee taxes																				Vesting of RSUs, net of shares withheld for employee taxes	—		—		(1,504)		—		—		—		—		(1,203)		(2,707)

Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	5		(5)		(5)		—		—		—		—		—		(5)		Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	1		(1)		—		—		—		—		—		—		—
Deferred offering costs		—		—		(357)		—		—		—		—		(296)		(653)

Equity reallocation between controlling and non-controlling interests	Equity reallocation between controlling and non-controlling interests	—		—		70,808		—		19		—		—		(70,827)		—		Equity reallocation between controlling and non-controlling interests	—		—		5,358		—		5		—		—		(5,363)		—
Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(19,217)		—		—		—		—		—		(19,217)		Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(2,745)		—		—		—		—		—		(2,745)
Balance at December 31, 2021		$	61	$	48	$	578,118	$	197,222	$	250	$	28,571	$	241,493	$	772,291	$	1,818,054
Balance at September 30, 2022																				Balance at September 30, 2022	$	62	$	47	$	596,355	$	164,044	$	671	$	28,922	$	173,443	$	677,565	$	1,641,109

Balance at March 31, 2021		$	38	$	57	$	188,751	$	60,407	$	155	$	25,885	$	—	$	384,400	$	659,693
Net income		—		—		—		152,070		—		18,737		17,890		191,977		380,674
Balance at March 31, 2022																				Balance at March 31, 2022	$	61	$	48	$	587,243	$	229,615	$	658	$	32,063	$	194,480	$	780,162	$	1,824,330
Net income (loss)																				Net income (loss)	—		—		—		(40,261)		—		16,261		(23,961)		(40,575)		(88,536)
Other comprehensive income	Other comprehensive income	—		—		—		—		45		119		—		72		236		Other comprehensive income	—		—		—		—		17		30		—		14		61
Contributed capital	Contributed capital	—		—		—		—		—		—		9,141		65		9,206		Contributed capital	—		—		—		—		—		—		8,785		17		8,802
Equity-based compensation	Equity-based compensation	—		—		4,702		—		—		8		—		5,653		10,363		Equity-based compensation	—		—		4,126		—		—		8		—		3,363		7,497
Distributions	Distributions	—		—		—		—		—		(15,590)		(4,624)		(58,898)		(79,112)		Distributions	—		—		—		—		—		(19,440)		(5,861)		(54,346)		(79,647)
Purchase of non-controlling interests		—		—		(657)		—		—		(1,502)		—		(887)		(3,046)

Dividends declared	Dividends declared	—		—		—		(15,255)		—		—		—		—		(15,255)		Dividends declared	—		—		—		(25,310)		—		—		—		—		(25,310)
Vesting of RSUs		1		—		(1)		—		—		—		—		—		—
Class A common stock issued for Greenspring acquisition		13		—		267,842		—		—		—		—		290,744		558,599
Class C Partnership units issued for Greenspring acquisition		—		—		64,847		—		—		—		—		70,392		135,239
Vesting of RSUs, net of shares withheld for employee taxes																				Vesting of RSUs, net of shares withheld for employee taxes	—		—		(1,504)		—		—		—		—		(1,203)		(2,707)

Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	9		(9)		(9)		—		—		—		—		—		(9)		Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares	1		(1)		—		—		—		—		—		—		—
Initial consolidation of legacy Greenspring general partner entities		—		—		—		—		—		—		219,086		—		219,086
Deferred offering costs		—		—		(357)		—		—		—		—		(296)		(653)

Equity reallocation between controlling and non-controlling interests	Equity reallocation between controlling and non-controlling interests	—		—		109,967		—		50		914		—		(110,931)		—		Equity reallocation between controlling and non-controlling interests	—		—		9,871		—		(4)		—		—		(9,867)		—
Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(56,967)		—		—		—		—		—		(56,967)		Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements(1)	—		—		(3,381)		—		—		—		—		—		(3,381)
Balance at December 31, 2021		$	61	$	48	$	578,118	$	197,222	$	250	$	28,571	$	241,493	$	772,291	$	1,818,054
Balance at September 30, 2022																				Balance at September 30, 2022	$	62	$	47	$	596,355	$	164,044	$	671	$	28,922	$	173,443	$	677,565	$	1,641,109

(1)See notes 10 13 and 1413 for more information.

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


		Nine Months Ended December 31,					Six Months Ended September 30,
		2022		2021			2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income (loss)	Net income (loss)	$	(102,091)	$	380,674	Net income (loss)	$	108,697	$	(88,536)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	Adjustments to reconcile net income (loss) to net cash provided by operating activities:					Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	35,308		15,289		Depreciation and amortization	23,979		23,245
Unrealized carried interest allocations and investment (income) loss	Unrealized carried interest allocations and investment (income) loss	364,314		(466,962)		Unrealized carried interest allocations and investment (income) loss	(108,921)		299,593
Unrealized legacy Greenspring carried interest allocations and investment (income) loss		453,582		(94,714)
Unrealized legacy Greenspring carried interest allocations and investment loss						Unrealized legacy Greenspring carried interest allocations and investment loss	73,430		349,763
Unrealized performance fee-related compensation	Unrealized performance fee-related compensation	(172,554)		228,146		Unrealized performance fee-related compensation	52,923		(140,679)
Unrealized legacy Greenspring performance fee-related compensation	Unrealized legacy Greenspring performance fee-related compensation	(416,574)		80,376		Unrealized legacy Greenspring performance fee-related compensation	(62,453)		(322,428)

Amortization of deferred financing costs	Amortization of deferred financing costs	354		118		Amortization of deferred financing costs	236		236
Equity-based compensation	Equity-based compensation	15,605		10,363		Equity-based compensation	14,388		7,497
Change in deferred income taxes	Change in deferred income taxes	(18,624)		10,216		Change in deferred income taxes	12,222		(13,113)
Fair value adjustment for acquisition-related contingent consideration	Fair value adjustment for acquisition-related contingent consideration	9,949		1,624		Fair value adjustment for acquisition-related contingent consideration	(4,288)		7,960
Gain on remeasurement of lease liabilities	Gain on remeasurement of lease liabilities	(2,709)		—		Gain on remeasurement of lease liabilities	—		(2,709)
Other non-cash activities	Other non-cash activities	26		1,882		Other non-cash activities	(1)		17
Adjustments to reconcile net income (loss) to net cash provided by operating activities of Consolidated Funds:
Adjustments to reconcile net income (loss) to net cash used in operating activities of Consolidated Funds:						Adjustments to reconcile net income (loss) to net cash used in operating activities of Consolidated Funds:
Unrealized investment income of Consolidated Funds	Unrealized investment income of Consolidated Funds	(4,895)		—		Unrealized investment income of Consolidated Funds	(11,134)		—
Purchases of investments of Consolidated Funds	Purchases of investments of Consolidated Funds	(9,417)		—		Purchases of investments of Consolidated Funds	(26,752)		—

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Fees and accounts receivable	Fees and accounts receivable	(8,628)		(274)		Fees and accounts receivable	(787)		(203)
Due from affiliates	Due from affiliates	(16,380)		(3,213)		Due from affiliates	2,595		5,853
Other assets and receivables	Other assets and receivables	(4,322)		6,808		Other assets and receivables	3,565		(9,285)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(6,640)		(6,777)		Accounts payable, accrued expenses and other liabilities	5,734		(2,016)
Accrued compensation and benefits	Accrued compensation and benefits	35,159		26,075		Accrued compensation and benefits	38,733		31,781
Accrued carried interest-related compensation		(102)		(5,636)
Due to affiliates	Due to affiliates	(539)		(1,819)		Due to affiliates	885		(570)
Lease right-of-use assets, net and lease liabilities	Lease right-of-use assets, net and lease liabilities	1,069		(198)		Lease right-of-use assets, net and lease liabilities	(820)		(692)
Changes in operating assets and liabilities of Consolidated Funds:	Changes in operating assets and liabilities of Consolidated Funds:					Changes in operating assets and liabilities of Consolidated Funds:

Other assets and receivables	Other assets and receivables	(839)		—		Other assets and receivables	(852)		—
Other liabilities and payables	Other liabilities and payables	647		—		Other liabilities and payables	7,338		—
Net cash provided by operating activities	Net cash provided by operating activities	151,699		181,978		Net cash provided by operating activities	128,717		145,714

Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities

Contributions to investments	Contributions to investments	(17,163)		(18,110)		Contributions to investments	(11,712)		(12,392)
Distributions received from investments	Distributions received from investments	4,772		7,845		Distributions received from investments	1,486		3,474
Contributions to investments in legacy Greenspring entities	Contributions to investments in legacy Greenspring entities	(10,634)		(9,141)		Contributions to investments in legacy Greenspring entities	(4,585)		(8,785)
Distributions received from investments in legacy Greenspring entities	Distributions received from investments in legacy Greenspring entities	2,762		1,073		Distributions received from investments in legacy Greenspring entities	2,011		2,486
Cash paid for Greenspring acquisition, net of cash acquired		—		(181,529)

Purchases of property and equipment	Purchases of property and equipment	(3,149)		(1,644)		Purchases of property and equipment	(14,605)		(2,095)
Other investing activities		—		31

Net cash used in investing activities	Net cash used in investing activities	(23,412)		(201,475)		Net cash used in investing activities	(27,405)		(17,312)

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


		Nine Months Ended December 31,					Six Months Ended September 30,
		2022		2021			2023		2022
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from capital contributions from non-controlling interests						Proceeds from capital contributions from non-controlling interests	$	28	$	17
Proceeds from sale of non-controlling interests						Proceeds from sale of non-controlling interests	3,045		—

Proceeds from revolving credit facility						Proceeds from revolving credit facility	25,000		—

Proceeds from capital contributions from non-controlling interests		$	179	$	65

Proceeds from revolving credit facility		20,000		185,000
Deferred financing costs		—		(2,356)
Purchase of non-controlling interests		—		(3,046)
Payment of deferred offering costs		—		(1,285)

Payments on revolving credit facility		—		(120,000)
Distributions to non-controlling interests	Distributions to non-controlling interests	(87,157)		(74,488)		Distributions to non-controlling interests	(58,860)		(73,786)
Proceeds from capital contributions to legacy Greenspring entities	Proceeds from capital contributions to legacy Greenspring entities	10,634		9,141		Proceeds from capital contributions to legacy Greenspring entities	4,585		8,785
Distributions to non-controlling interests in legacy Greenspring entities	Distributions to non-controlling interests in legacy Greenspring entities	(6,842)		(4,624)		Distributions to non-controlling interests in legacy Greenspring entities	(6,156)		(5,861)
Dividends paid to common stockholders	Dividends paid to common stockholders	(37,360)		(14,758)		Dividends paid to common stockholders	(41,533)		(24,507)

Payments for employee taxes related to net settlement of RSUs	Payments for employee taxes related to net settlement of RSUs	(2,707)		—		Payments for employee taxes related to net settlement of RSUs	(613)		(2,707)
Payments to related parties under Tax Receivable Agreements	Payments to related parties under Tax Receivable Agreements	(5,973)		(713)		Payments to related parties under Tax Receivable Agreements	(7,670)		(4,790)
Other financing activities		(1)		(9)

Cash flows from financing activities of Consolidated Funds:	Cash flows from financing activities of Consolidated Funds:					Cash flows from financing activities of Consolidated Funds:
Contributions from redeemable non-controlling interests in Consolidated Funds	Contributions from redeemable non-controlling interests in Consolidated Funds	4,575		—		Contributions from redeemable non-controlling interests in Consolidated Funds	28,740		—

Net cash used in financing activities	Net cash used in financing activities	(104,652)		(27,073)		Net cash used in financing activities	(53,434)		(102,849)
Effect of foreign currency exchange rate changes	Effect of foreign currency exchange rate changes	(53)		(377)		Effect of foreign currency exchange rate changes	(593)		1,481
Net increase (decrease) in cash, cash equivalents and restricted cash		23,582		(46,947)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	47,285		27,034
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	117,449		183,863		Cash, cash equivalents and restricted cash at beginning of period	129,517		117,449
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	141,031	$	136,916	Cash, cash equivalents and restricted cash at end of period	$	176,802	$	144,483

Supplemental disclosures:	Supplemental disclosures:					Supplemental disclosures:

Non-cash operating, investing, and financing activities:	Non-cash operating, investing, and financing activities:					Non-cash operating, investing, and financing activities:

Accrued dividends	Accrued dividends	$	556	$	497	Accrued dividends	$	1,151	$	803
Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements	Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements	(4,447)		(56,967)		Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements	(1,293)		(3,381)
Accrued deferred offering costs		—		447

Establishment of lease liabilities in exchange for lease right-of-use assets	Establishment of lease liabilities in exchange for lease right-of-use assets	77,731		79,629		Establishment of lease liabilities in exchange for lease right-of-use assets	2,878		25,269
Remeasurement of lease liabilities	Remeasurement of lease liabilities	(18,166)		—		Remeasurement of lease liabilities	—		(18,166)
Class A common stock issued for Greenspring acquisition		—		558,598
Class C Partnership units issued for Greenspring acquisition		—		135,239

Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:					Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	120,093	$	135,885	Cash and cash equivalents	$	117,484	$	143,562
Restricted cash	Restricted cash	971		1,031		Restricted cash	679		921
Cash and cash equivalents of Consolidated Funds	Cash and cash equivalents of Consolidated Funds	19,967		—		Cash and cash equivalents of Consolidated Funds	58,639		—
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	141,031	$	136,916	Total cash, cash equivalents and restricted cash	$	176,802	$	144,483

See accompanying notes to condensed consolidated financial statements.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

1. Organization

StepStone Group Inc. (“SSG”) was incorporated in the state of Delaware on November 20, 2019. The company was formed for the purpose of completing an initial public offering (“IPO”) in order to conduct the business of StepStone Group LP (the “Partnership”) as a publicly-traded entity. SSG is the sole managing member of StepStone Group Holdings LLC (the “General Partner”), the general partner of the Partnership. Unless otherwise specified, “StepStone” or the “Company” refers to SSG and its consolidated subsidiaries, including the Partnership, throughout the remainder of these notes to the condensed consolidated financial statements.

The Company is a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to its clients. The Company’s clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, including high-net-worth and mass affluent individuals. The Company partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”).

The Company, through its subsidiaries, acts as the investment advisor and general partner or managing member to separately managed accounts (“SMAs”) and focused commingled funds, including acquired Greenspring funds (collectively, the “StepStone Funds”).

SSG is a holding company whose principal asset is a controlling financial interest in the Partnership through its ownership of all of the Partnership’s Class A units and 100% of the membership interests in the General Partner of the Partnership. SSG acts as the sole managing member of the General Partner of the Partnership and, as a result, indirectly operates and controls all of the Partnership’s business and affairs. As a result, SSG consolidates the financial results of the Partnership and reports non-controlling interests related to the Class B and Class C units of the Partnership which are not owned by SSG. The assets and liabilities of the Partnership represent substantially all of SSG’s consolidated assets and liabilities, with the exception of certain deferred income taxes and payables due to affiliates pursuant to tax receivable agreements (see note 10). Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to five votes. As of ~~December 31, 2022,~~September 30, 2023, SSG held approximately ~~56.2%~~57.0% of the economic interest in the Partnership. As the Partnership’s limited partners exchange their Class B and Class C units into SSG’s Class A common stock in the future, SSG’s economic interest in the Partnership will increase relative to that of the Class B and Class C unitholders.

~~Greenspring Acquisition~~

On September 20, 2021, the Company completed the acquisition of 100% of the equity of Greenspring Associates, Inc. and certain of its affiliates (collectively, “Greenspring”). The results of Greenspring’s operations have been included in the condensed consolidated financial statements effective September 20, 2021. In connection with the Greenspring acquisition, the Company issued 12,686,756 shares of its Class A common stock and the Partnership issued 3,071,519 newly created Class C units of the Partnership, with each such unit exchangeable into one share of Class A common stock, subject to certain adjustments and restrictions. See notes 13 and 14 for more information.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its annual report on Form 10-K for the fiscal year ended March 31, ~~2022~~2023 filed with the Securities and Exchange Commission (“SEC”).

Certain of the StepStone Funds are investment companies that follow specialized accounting under GAAP and reflect their investments at estimated fair value. Accordingly, the carrying value of the Company’s equity method investments in such entities retains the specialized accounting.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation. ~~Payments~~Amounts relating to ~~related parties under Tax Receivable Agreements has~~unpaid realized carried interest-related compensation that were previously reported within accrued carried interest-related compensation have been presented ~~separately~~ within ~~cash flows from financing activities~~accrued compensation and benefits in the condensed consolidated ~~statements of cash flows, and was previously included within due to affiliates within cash flows from operating activities.~~balance sheets.

Consolidation

The Company consolidates all entities that it controls through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”). Under the VIE model, management first assesses whether the Company has a variable interest in an entity. In evaluating whether the Company holds a variable interest, fees received as a decision maker or in exchange for services (including management fees, incentive fees and carried interest allocations) that are customary and commensurate with the level of services provided, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, are not considered variable interests. If the Company has a variable interest in an entity, management further assesses whether that entity is a VIE, and if so, whether the Company is the primary beneficiary under the VIE model. Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. The consolidation analysis can generally be performed qualitatively; however, in certain situations a quantitative analysis may also be performed. Investments and redemptions (either by the Company, affiliates of the Company or third parties) or amendments to the governing documents of the respective StepStone Funds that are VIEs could affect the entity’s status as a VIE or the determination of the primary beneficiary.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Under the VIE model, an entity is deemed to be the primary beneficiary of a VIE if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. When assessing whether the Company is the primary beneficiary of a VIE, management evaluates whether the Company’s involvement, through holding interests directly or indirectly in an entity or contractually through other variable interests, would give the Company a controlling financial interest. This analysis includes an evaluation of the Company’s control rights, as well as the economic interests that the Company holds in the VIE, including indirectly through related parties.

The Company provides investment advisory services to the StepStone Funds, which have third-party clients. These funds are investment companies and are typically organized as limited partnerships or limited liability companies for which the Company, through its operating subsidiaries, acts as the general partner or managing member. A limited partnership or similar entity is a VIE if the unaffiliated limited partners or members do not have substantive rights to terminate or liquidate the fund or remove the general partner or substantive rights to participate. Certain StepStone Funds are VIEs because they have not granted unaffiliated limited partners or members substantive rights to terminate the fund or remove the general partner or substantive rights to participate. The Company does not consolidate these StepStone Funds because it is not the primary beneficiary of those funds, primarily because it does not hold an interest in those funds that is considered more than insignificant and its fee arrangements are considered customary and commensurate.

The Company has determined that certain of its operating subsidiaries, StepStone Group Real Assets LP (“SRA”), StepStone Group Real Estate LP (“SRE”), Swiss Capital Alternative Investments AG (“Swiss Capital”), and StepStone Group Private Wealth LLC (“SPW”) and certain StepStone Funds are VIEs, and that the Company is the primary beneficiary of each entity because it has a controlling financial interest in each entity; accordingly, the Company consolidates these entities. The assets and liabilities of the consolidated VIEs are presented gross in the condensed consolidated balance sheets. The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs. See note 4 for more information on both consolidated and unconsolidated VIEs.

In connection with the acquisition of Greenspring ~~acquisition,~~Associates, Inc. and certain of its affiliates (“Greenspring”) that was completed on September 20, 2021, the Company, indirectly through its subsidiaries, became the sole and/or managing member of certain entities, each of which is the general partner of an investment fund (“legacy Greenspring general partner entities”). The Company did not acquire any direct economic interests attributable to the legacy Greenspring general partner entities, including legacy Greenspring investments in funds and carried interest allocations. However, certain arrangements negotiated as part of the acquisition represent variable interests that could be significant. The Company determined that the legacy Greenspring general partner entities are VIEs and it is the primary beneficiary of each such entity because it has a controlling financial interest in each entity. As a result, the Company consolidates these entities.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The Company and its subsidiaries manages or controls certain entities that constitute client investment funds that have been consolidated in the accompanying condensed consolidated financial statements (“Consolidated Funds”). Including the results of the Consolidated Funds increases the reported amounts of the assets, liabilities, expenses and cash flows in the accompanying condensed consolidated financial statements, and amounts related to economic interests held by third-party investors are reflected as redeemable non-controlling interests in Consolidated Funds. The revenues earned by the Company as investment manager of the Consolidated Funds are eliminated in consolidation and generally have no direct effect on the net income attributable to SSG or to Stockholders' Equity.

Non-Controlling Interests

Non-controlling interests (“NCI”) reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by the Company. Non-controlling interests are presented as separate components of stockholders’ equity on the Company’s condensed consolidated balance sheets to clearly distinguish between the Company’s interests and the economic interests of third parties and employees in those entities. Net income (loss) attributable to SSG, as reported in the condensed consolidated statements of income, is presented net of the portion of net income (loss) attributable to holders of non-controlling interests. See note 13 for more information on ownership interests in the Company.

Non-controlling interests in subsidiaries represent the economic interests in SRA, SRE, and Swiss Capital (the variable interest entities included in the Company’s condensed consolidated financial statements) held by third parties and employees in those entities. Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities. The Company did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.

Non-controlling interests in the Partnership represent the economic interests related to the Class B and Class C units of the Partnership which are not owned by SSG. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Redeemable non-controlling interests in Consolidated Funds represent the economic interests in the Consolidated Funds which are not held by SSG, but are held by the client investors in the funds. These interests are presented as redeemable non-controlling interests in Consolidated Funds within the condensed consolidated balance sheets, outside of permanent capital as the investors in these funds generally have the right to withdraw their capital, subject to the terms of the respective contractual agreements. Redeemable non-controlling interests in Consolidated Funds are allocated a share of income or loss in the respective fund in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Accounting for Differing Fiscal Periods

The StepStone Funds primarily have a fiscal year end as of December 31. The Company accounts for its investments in the StepStone Funds on a three-month lag due to the timing of receipt of financial information from the investments held by the StepStone Funds. The StepStone Funds primarily invest in private markets funds that generally require at least 90 days following the calendar year end to provide audited financial statements. As a result, the Company uses the December 31 audited financial statements of the StepStone Funds, which reflect the underlying private markets funds as of December 31, to record its investments (including any carried interest allocated by those investments) for its fiscal year-end consolidated financial statements as of March 31. The Company further adjusts the reported carrying values of its investments in the StepStone Funds for its share of capital contributions to and distributions from the StepStone Funds during the three-month lag period. For this interim period ~~ending December 31, 2022,~~ended September 30, 2023, the Company used the ~~September~~June 30, ~~2022~~2023 unaudited financial statements of the StepStone Funds, which reflect the underlying private market funds as of ~~September~~June 30, ~~2022,~~2023, to record its investments (including any carried interest allocated by those investments), as adjusted for capital contributions and distributions during the three-month lag period ended ~~December 31, 2022.~~September 30, 2023.

The Company does not account for management and advisory fees or incentive fees on a three-month lag.

To the extent that management becomes aware of any material events that affect the StepStone Funds during the three-month lag period, the effect of the events would be disclosed in the notes to the condensed consolidated financial statements.

Current Events

In 2023, signs of slowing inflation coupled with a strong labor market contributed to a rebound in financial markets despite banking system volatility as recession fears receded in anticipation that interest rates may not rise as much as previously expected. After strong gains in the first half of 2023, most financial markets posted negative returns in the quarter ended September 30, 2023 over concerns of a sustained period of higher interest rates and slowing economic growth.

The Company is continuing to closely monitor developments related to ~~COVID-19,~~ inflation, rising interest rates, ~~and~~ the ongoing Russia-Ukraine conflict, banking system volatility and the Israel-Hamas conflict, and assess the impact on financial markets and the Company’s business. The Company’s ~~future~~ results and the overall industry results have been and may continue to be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which ~~could~~have resulted in, and may continue to result in, delayed or decreased management fees. Further, if fund managers ~~are~~have been unable or less able to ~~profitably~~ exit existing investments ~~such~~profitably. Such conditions ~~could~~have resulted in, and may continue to result in, delayed or decreased performance fee revenues. It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and the Company’s condensed consolidated financial statements.

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace – including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and therefore a lesser degree of judgment is used in measuring their fair value.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of their fair values, as follows:

•Level I – Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

•Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. The types of financial instruments classified in this category include less liquid securities traded in active markets and securities traded in other than active markets.

•Level III – Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the financial instrument.

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for financial instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III.

The Company considers its cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility, and contingent consideration ~~and liability classified award balances~~obligation balance to be financial instruments. The carrying amounts of cash, cash equivalents, restricted cash, fees and accounts receivable and accounts payable equal or approximate their fair values due to their nature and/or the relatively short period over which they are held. See note 6 for additional details regarding the fair value of the Company’s contingent consideration obligation balance and ~~liability classified award balances and~~see note 8 for additional details regarding the fair value of the Company’s revolving credit facility balance.

Restricted Cash

Restricted cash consists of cash that the Company is contractually obligated to maintain to secure its letters of credit used primarily related to its office facilities and other obligations.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Investments

Investments primarily include the Company’s ownership interests in the StepStone Funds, as general partner or managing member of such funds. The Company accounts for all investments in which it has or is otherwise presumed to have significant influence, but not control, including the StepStone Funds, using the equity method of accounting. The carrying value of these equity method investments is determined based on amounts invested by the Company, adjusted for the Company’s share in the earnings or losses of each investee, after consideration of contractual arrangements that govern allocations of income or loss (including carried interest allocations), less distributions received. Investments include the Company’s cumulative accrued carried interest allocations from the StepStone Funds, which primarily represent performance-based capital allocations, assuming the StepStone Funds were liquidated as of each reporting date in accordance with the funds’ governing documents. Legacy Greenspring investments in funds and accrued carried interest allocations represent the economic interests held by the legacy Greenspring general partner entities in certain funds for which the Company does not have any direct economic interests. All of the economics in respect of such interests are payable to employees and are therefore reflected as non-controlling interests in legacy Greenspring entities and legacy Greenspring performance fee-related compensation. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

Management's determination of fair value for investments in the underlying funds includes various valuation techniques. These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted average cost of capital, exit multiples, or terminal growth rates.

Investments of Consolidated Funds

The Company’s Consolidated Funds are investment companies under GAAP and reflect their investments at estimated fair value. The Company has retained the specialized investment company accounting for the Consolidated Funds under GAAP. Investments of the Consolidated Funds are recorded at fair value and the unrealized appreciation (depreciation) in fair value is recognized in the condensed consolidated statements of income. In addition, the Consolidated Funds do not consolidate their majority-owned and controlled investments in underlying portfolio companies.

Leases

The Company determines whether an arrangement contains a lease at inception of the arrangement. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines the classification as either an operating or finance lease. The Company’s identified leases primarily consist of operating lease agreements for office space and certain equipment, as the lessee. Operating leases are included in lease right-of-use-assets, net and lease liabilities in the condensed consolidated balance sheets. Certain leases include lease and non-lease components, which the Company accounts for as a single lease component. Lease right-of-use (“ROU”) assets and lease liabilities are measured based on the present value of future minimum lease payments over the lease term at the commencement date. Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. The Company uses its incremental borrowing rate in determining the present value of future minimum lease payments. The Company’s lease terms may include options to extend or terminate the lease, which are included in the measurement of ROU assets and lease liabilities when it is reasonably certain that the Company will exercise those options.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Operating lease expense associated with minimum lease payments is recognized on a straight-line basis over the lease term in general, administrative and other expenses in the condensed consolidated statements of income. Minimum lease payments for leases with an initial term of twelve months or less are not recorded in the condensed consolidated balance sheets. See note 1514 for more information.

~~Business Combinations~~

The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed based on their fair values, as determined by management at the acquisition date. Contingent consideration obligations that are elements of consideration transferred are recognized at the acquisition date as part of the fair value transferred in exchange for the acquired business. Contingent consideration arrangements are revalued to fair value each reporting period. Examples of critical estimates in valuing certain of the intangible assets acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful life, discount rates and income tax rates. Acquisition-related costs incurred in connection with a business combination are expensed as incurred and are included in general, administrative and other expenses in the condensed consolidated statements of income.

Intangibles and Goodwill

The Company’s finite-lived intangible assets consist of acquired contractual rights to earn future management and advisory fee income and client relationships. Finite-lived intangible assets are amortized over their estimated useful lives, which range from 8 to 10 years. The Company did not have any intangible assets that were deemed to have an indefinite life as of ~~December 31, 2022.~~September 30, 2023.

Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. There were no impairment charges related to the Company’s finite-lived intangible assets during the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 and ~~2021.~~2022.

Goodwill represents the excess amount of consideration transferred in a business combination above the fair value of the identifiable net assets. Goodwill is assessed for impairment at least annually using a qualitative and, if necessary, a quantitative approach. The Company performs its annual goodwill impairment test as of January 1, or more frequently, if events and circumstances indicate that an impairment may exist. Goodwill is tested for impairment at the reporting unit level. The initial assessment for impairment under the qualitative approach is to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, a quantitative assessment is performed to measure the amount of impairment loss, if any. The quantitative assessment includes comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the lesser of (a) the difference between the carrying amount of the reporting unit and its fair value and (b) the total carrying amount of the reporting unit’s goodwill.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

Revenues

The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Revenue is recognized in a manner that depicts the transfer of promised goods or services to customers and for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The application of ASC 606 requires an entity to identify its contract(s) with a customer, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, variable consideration is included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. The Company has elected to apply the variable consideration allocation exception for its fee arrangements with its customers.

Management and Advisory Fees, Net

The Company earns management fees for services provided to its SMAs and focused commingled funds. The Company earns advisory fees for services provided to advisory clients where the Company does not have discretion over investment decisions. The Company considers its performance obligations in its customer contracts from which it earns management and advisory fees to be one or more of the following, based on the services promised: asset management services, advisory services and/or the arrangement of administrative services.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The Company recognizes revenues from asset management services and advisory services when control of the promised services is transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. SMAs are generally contractual arrangements involving an investment management agreement between the Company and a single client, and are typically structured as a partnership or limited liability company for which a subsidiary of SSG serves as the general partner or managing member. Focused commingled funds are structured as limited partnerships or limited liability companies with multiple clients, for which a subsidiary of the Company serves as the general partner or managing member. The Company determined that the individual client or single limited partner or member is the customer with respect to SMAs and advisory ~~clients, while~~clients. Based on certain facts and circumstances specific to each individual fund structure, the ~~investment~~Company has determined that for accounting purposes, either the StepStone Fund or the individual investors in the fund ~~is generally~~may be considered to be the customer for arrangements with focused commingled funds.

When asset management services and the arrangement of administrative services are the performance obligations promised in a contract, the Company satisfies these performance obligations over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to the customer. Management fees earned from these contracts where the Company has discretion over investment decisions are generally calculated based on a percentage of unaffiliated committed capital or net invested capital, and these amounts are typically billed quarterly. For certain investment funds, management fees are initially based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term. In addition, the management fee rate charged may also be reduced for certain investment funds depending on the contractual arrangement. The management fee basis is subject to factors outside of the Company’s control. Therefore, estimates of future period management fees are not included in the transaction price because those estimates would be considered constrained. Advisory fees from contracts where the Company does not have discretion over investment decisions are generally based on fixed amounts and typically billed quarterly.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

Management fees generally exclude reimbursements for expenses paid by the Company on behalf of its customers, including amounts related to certain professional fees and other fund administrative expenses pursuant to the fund’s governing documents. For professional and administrative services that the Company arranges to be performed by third parties on behalf of investment funds, management has concluded that the nature of its promise is to arrange for the services to be provided and, accordingly, the Company does not control the services provided by the third parties before they are transferred to the customer. Therefore, the Company is acting as an agent, and the reimbursements for these professional fees paid on behalf of the investment funds are generally presented on a net basis.

The Company and certain investment funds that it manages have distribution and service agreements with third-party financial institutions, whereby the Company pays a portion of the fees it receives to such institutions for ongoing distribution and servicing of customer accounts. Management has concluded that the Company does not act as principal for the third-party services, as the Company does not control the services provided by the third parties before they are transferred to the customer. Therefore, the Company is acting as an agent, and the management fees are recorded net of these service fees.

The Company may incur certain costs in connection with satisfying its performance obligations for investment management services – primarily employee travel costs ~~and certain professional fees~~ – for which it receives reimbursements from its customers. For reimbursable employee travel costs, ~~and certain professional fees,~~ the Company concluded it controls the services provided by its employees ~~and other parties~~ and, therefore, is acting as principal. Accordingly, the Company records the reimbursement for these costs incurred on a gross basis – that is, as revenue in management and advisory fees, net and expense in general, administrative and other expenses in the condensed consolidated statements of income. For reimbursable costs incurred in connection with satisfying its performance obligations for administration services, the Company concluded it does not control the services provided by its employees and other parties and, therefore, is acting as agent. Accordingly, the Company records the reimbursement for these costs incurred on a net basis.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Performance Fees

The Company earns two types of performance fee revenues: incentive fees and carried interest allocations, as described below.

Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, for which the Company is the investment adviser, subject to the achievement of minimum return levels or performance benchmarks. Incentive fees are a form of variable consideration and represent contractual fee arrangements in the Company’s contracts with its customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period. Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.

The Company recognizes incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization). However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt. Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to the Company from unaffiliated limited partners in the StepStone Funds in which the Company holds an equity interest. The Company is entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%) in accordance with the terms set forth in each respective fund’s governing documents. The Company accounts for its investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of ASC 606.

Legacy Greenspring carried interest allocations reflect the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest. The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. The Company accounts for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606. The Company does not hold any direct economic interests in the legacy Greenspring general partner entities and thus is not entitled to any carried interest allocation from the legacy funds. All of the carried interest allocations in respect of the legacy Greenspring funds are payable to employees who are considered affiliates of the Company and are therefore reflected as legacy Greenspring performance fee-related compensation in the condensed consolidated statements of income.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The Company recognizes revenue attributable to carried interest allocations from a fund based on the amount that would be due to the Company pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. Accordingly, the amount recognized as carried interest allocation revenue reflects the Company’s share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period. The Company records the amount of carried interest allocated to the Company as of each period end as accrued carried interest allocations receivable, which is included as a component of investments in the condensed consolidated balance sheets. Management's determination of fair value for investments in the underlying funds includes various valuation techniques. These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted average cost of capital, exit multiples, or terminal growth rates.

Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is subject to reversal to the extent that the amount received to date exceeds the amount due to the Company based on cumulative results. As such, a liability is accrued for potential clawback obligations if amounts previously distributed to the Company would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, no material amounts for potential clawback obligations had been accrued.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

Equity-Based Compensation

Equity-based compensation represents grants of equity-based awards or arrangements to certain employees and directors. The Company accounts for grants of equity-based awards, including restricted stock units (“RSUs”), to certain employees and directors at fair value as of the grant date. The Company recognizes non-cash compensation expense attributable to these grants on a straight-line basis over the requisite service period, which is generally the vesting period. Expense related to grants of equity-based awards is recognized as equity-based compensation expense in the condensed consolidated statements of income. The fair value of RSUs is determined by the closing stock price on the grant date. Forfeitures of equity-based awards are recognized as they occur. Awards classified as liabilities are remeasured at the end of each reporting period until settlement. See note 9 for additional information regarding the Company’s accounting for equity-based awards.

Income Taxes

SSG is a corporation for U.S. federal income tax purposes and therefore is subject to U.S. federal and state income taxes on its share of taxable income generated by the Partnership. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including SSG, and is generally not subject to U.S. federal or state income tax at the Partnership level. The Partnership’s non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain subsidiaries are subject to local jurisdiction taxes at the entity level, which are reflected within income tax expense in the condensed consolidated statements of income. As a result, the Partnership does not record U.S. federal and state income taxes on income in the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases, using tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted. Deferred tax liabilities are included within accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets. The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units. See Tax Receivable Agreements below.

Deferred tax assets are reduced by a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent on the amount, timing and character of the Company’s future taxable income. When evaluating the realizability of deferred tax assets, all evidence – both positive and negative – is considered. This evidence includes, but is not limited to, expectations regarding future earnings, future reversals of existing temporary tax differences and tax planning strategies.

The Company is subject to the provisions of ASC Subtopic 740-10, Accounting for Uncertainty in Income Taxes. This standard establishes consistent thresholds as it relates to accounting for income taxes. It defines the threshold for recognizing the benefits of tax return positions in the financial statements as more-likely-than-not to be sustained by the relevant taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be realized. If upon performance of an assessment pursuant to this subtopic, management determines that uncertainties in tax positions exist that do not meet the minimum threshold for recognition of the related tax benefit, a liability is recorded in the condensed consolidated financial statements. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as interest expense and general, administrative and other expenses, respectively, in the condensed consolidated statements of income. See note 10 for more information.

The Company has elected to account for global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries in the period the tax is incurred.

~~StepStone Group Inc.~~

~~Notes~~Tax laws are complex and subject to ~~Condensed Consolidated Financial Statements (Unaudited)~~

(different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in ~~thousands, except share~~determining tax expense and ~~per share amounts~~in evaluating tax positions, including evaluating uncertainties under GAAP. The Company reviews its tax positions quarterly and ~~where noted)~~

adjusts its tax balances as new information becomes available.

Tax Receivable Agreements

SSG has entered into an Exchanges Tax Receivable Agreement (the “Exchanges Tax Receivable Agreement”) with the partners of the Partnership as of the date of the IPO and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (together, with the Exchanges Tax Receivable Agreement, the “Tax Receivable Agreements”). The Tax Receivable Agreements provide for payment by SSG to ~~such~~the Class B limited partners, Class C limited partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partners’ and institutional investors’ Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15% of these net cash tax savings under both Tax Receivable Agreements. ~~In connection with the Greenspring acquisition, the sellers receiving Class C units of the Partnership became parties to the Exchanges Tax Receivable Agreement.~~ See ~~notes~~note 13 ~~and 14~~ for more information.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Accumulated Other Comprehensive Income

The Company’s accumulated other comprehensive income consists of foreign currency translation adjustments and unrealized gains and losses on the defined benefit plan sponsored by one of its subsidiaries. The components of accumulated other comprehensive income were as follows:


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Foreign currency translation adjustments	Foreign currency translation adjustments	$	285	$	331	Foreign currency translation adjustments	$	149	$	280
Unrealized gain on defined benefit plan, net	Unrealized gain on defined benefit plan, net	325		327		Unrealized gain on defined benefit plan, net	189		181
Accumulated other comprehensive income	Accumulated other comprehensive income	$	610	$	658	Accumulated other comprehensive income	$	338	$	461

Segments

The Company operates as one business, a fully-integrated private markets solution provider. The Company’s chief operating decision maker, who is the Company’s chief executive officer, utilizes a consolidated approach to assess the performance of and allocate resources to the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs issued during the current period not listed below were assessed and determined to either be not applicable to the Company, or not expected to have a material impact on the condensed consolidated financial statements.

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which amends current guidance to provide optional practical expedients and exceptions, if certain criteria are met, for applying GAAP to contracts, hedging relationships and other transactions that are affected by the reference rate reform. The expedients and exceptions in this update apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Initially the update did not apply to contract modifications or hedging relationships entered into after December 31, 2022, but in December 2022, the FASB issued ASU 2022-06, which defers the sunset date for applying reference rate reform relief in ASC 848 to December 31, 2024. This guidance is effective for adoption anytime after March 12, 2020, but must be adopted prior to December 31, 2024. The Company is currently evaluating the impact on the condensed consolidated financial statements.

~~In August 2020, the FASB issued ASU 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The Company adopted this guidance on April 1, 2022 under the modified retrospective approach. The Company has changed its accounting policy to reflect the updated equity classification of contracts in an entity’s own equity, and has accounted for freestanding instruments that are indexed to and settled in the Company’s own equity at fair value with changes in fair value recognized in earnings. Adoption of this guidance did not have a material effect on the condensed consolidated financial statements.

~~In July 2021, the FASB issued ASU 2021-05,~~ ~~Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments~~, which modifies ASC 842 to amend the lease classification requirements for lessors to align with practice under ASC Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease under ASC 842, and the lessor would have otherwise recognized a day-one loss on the investment in the lease. This guidance is effective for annual periods beginning after December 15, 2021 and interim periods within those annual periods. The Company adopted this guidance on April 1, 2022. Adoption of this guidance did not have a material effect on the condensed consolidated financial statements.

~~In November 2021, the FASB issued ASU 2021-08,~~ ~~Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~, which modifies ASC 805 to require an acquiring entity in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. This guidance is effective for annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance on April 1, 2022, and will apply the guidance prospectively to business combinations that occur after this date. The guidance had no effect on the condensed consolidated financial statements.

2625

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

3. Revenues

The following presents revenues disaggregated by product offering, which aligns with the Company’s performance obligations and the basis for calculating each amount:


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
Management and Advisory Fees, Net	Management and Advisory Fees, Net	2022		2021		2022		2021		Management and Advisory Fees, Net	2023		2022		2023		2022
Focused commingled funds	Focused commingled funds	$	60,680	$	46,523	$	164,975	$	99,173	Focused commingled funds	$	70,322	$	51,553	$	137,328	$	104,295
SMAs	SMAs	53,515		44,022		156,154		127,137		SMAs	56,430		52,179		112,174		102,639
Advisory and other services	Advisory and other services	13,926		15,028		40,698		40,663		Advisory and other services	13,741		13,788		27,842		26,772
Fund reimbursement revenues	Fund reimbursement revenues	632		811		2,779		1,055		Fund reimbursement revenues	1,630		1,601		2,894		2,147
Total management and advisory fees, net	Total management and advisory fees, net	$	128,753	$	106,384	$	364,606	$	268,028	Total management and advisory fees, net	$	142,123	$	119,121	$	280,238	$	235,853


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
Incentive Fees	Incentive Fees	2022		2021		2022		2021		Incentive Fees	2023		2022		2023		2022
SMAs	SMAs	$	5	$	—	$	5,370	$	5,905	SMAs	$	4,601	$	5,365	$	4,607	$	5,365
Focused commingled funds	Focused commingled funds	2,975		27		2,975		100		Focused commingled funds	345		—		345		—
Total incentive fees	Total incentive fees	$	2,980	$	27	$	8,345	$	6,005	Total incentive fees	$	4,946	$	5,365	$	4,952	$	5,365


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
Carried Interest Allocations	Carried Interest Allocations	2022		2021		2022		2021		Carried Interest Allocations	2023		2022		2023		2022
SMAs	SMAs	$	(46,443)	$	133,661	$	(205,019)	$	436,283	SMAs	$	44,644	$	(120,451)	$	84,780	$	(158,576)
Focused commingled funds	Focused commingled funds	(604)		65,433		(36,680)		185,559		Focused commingled funds	12,312		(33,858)		36,013		(36,076)
Total carried interest allocations	Total carried interest allocations	$	(47,047)	$	199,094	$	(241,699)	$	621,842	Total carried interest allocations	$	56,956	$	(154,309)	$	120,793	$	(194,652)


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
Legacy Greenspring Carried Interest Allocations	Legacy Greenspring Carried Interest Allocations	2022		2021		2022		2021		Legacy Greenspring Carried Interest Allocations	2023		2022		2023		2022
SMAs	SMAs	$	—	$	—	$	—	$	—	SMAs	$	98	$	—	$	98	$	—
Focused commingled funds~~(1)~~	Focused commingled funds~~(1)~~	(88,921)		104,960		(371,200)		104,960		Focused commingled funds~~(1)~~	(12,701)		(128,672)		(36,648)		(282,279)
Total legacy Greenspring carried interest allocations(1)	Total legacy Greenspring carried interest allocations(1)	$	(88,921)	$	104,960	$	(371,200)	$	104,960	Total legacy Greenspring carried interest allocations(1)	$	(12,603)	$	(128,672)	$	(36,550)	$	(282,279)

_______________________________

(1)The three months ended ~~December 31,~~September 30, 2023 and 2022 ~~and 2021~~ reflect the net effect of gross realized carried interest allocations of ~~$5.2~~$25.0 million and ~~$24.6~~$10.6 million, respectively, and the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022 ~~and 2021~~ reflect the net effect of gross realized carried interest allocations of ~~$45.4~~$25.9 millionand ~~$27.6~~$40.1 million, respectively, and the reversal of such amounts in unrealized carried interest allocations for such periods.

The ~~decrease~~increase in ~~carried interest allocations and legacy Greenspring~~ carried interest allocations for the three and ~~nine~~six months ended December 31, 2022 was primarily attributable to net unrealized depreciation in the fair value of certain underlying fund investments. The increase in carried interest allocations and legacy Greenspring carried interest allocations for the three and nine months ended December 31, 2021September 30, 2023 was primarily attributable to net unrealized appreciation in the fair value of certain underlying fund investments. The increase in legacy Greenspring carried interest allocations for the three and six months ended September 30, 2023 was primarily attributable to lower net unrealized depreciation in the fair value of certain underlying fund investments as compared to the three and six months ended September 30, 2022. See note 2 for a discussion of the Company’s accounting policy for investments on a three-month lag.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The Company derives revenues from clients located in both the United States and other countries. The table below presents the Company’s revenues by geographic location:


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
Revenues(1)	Revenues(1)	2022		2021		2022		2021		Revenues(1)	2023		2022		2023		2022
United States	United States	$	(24,883)	$	170,726	$	(223,480)	$	282,366	United States	$	47,020	$	(91,647)	$	92,113	$	(198,597)
Non-U.S. countries	Non-U.S. countries	20,648		239,739		(16,468)		718,469		Non-U.S. countries	144,402		(66,848)		277,320		(37,116)

_______________________________

(1)Revenues are attributed to countries based on client location for SMAs and advisory and other services, or location of investment vehicle for focused commingled funds.

For the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ no individual client represented 10% or more of the Company’s net management and advisory fees.

As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, the Company had ~~$19.0~~$25.2 million and $21.6 million, respectively, of deferred revenues, ~~in each period,~~ which is included in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets. During the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, the Company had recognized ~~$4.9~~$3.6 million as revenue from amounts included in the deferred revenue balance as of March 31, ~~2022.~~2023.

4. Variable Interest Entities

Consolidated VIEs

The Company consolidates certain VIEs for which it is the primary beneficiary. Such VIEs consist of certain operating entities not wholly-owned by the Company (e.g., Swiss Capital, SRA and SRE), SPW, legacy Greenspring general partner entities and certain StepStone Funds. See note 2 for more information on the Company’s accounting policies related to the consolidation of VIEs. The assets of the consolidated VIEs totaled ~~$1,057.2~~$983.8 million and ~~$1,435.2~~$964.2 million as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, respectively. The liabilities of the consolidated VIEs totaled ~~$787.4~~$653.3 million and $~~1,181.2~~682.7 million as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, respectively. The assets of the consolidated VIEs may only be used to settle obligations of the same VIE. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a clawback of previously distributed carried interest. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, no material amounts previously distributed have been accrued for clawback liabilities.

2827

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Unconsolidated VIEs

The Company holds variable interests in the form of direct equity interests in certain VIEs that are not consolidated because the Company is not the primary beneficiary. The Company’s maximum exposure to loss is limited to the potential loss of assets recognized by the Company relating to these unconsolidated entities. The carrying value of the assets and liabilities recognized in the condensed consolidated balance sheets with respect to the Company’s interests in VIEs that were not consolidated is set forth below:


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Investments in funds	Investments in funds	$	109,102	$	107,045	Investments in funds	$	129,768	$	115,187
Legacy Greenspring investments in funds	Legacy Greenspring investments in funds	165,345		194,480		Legacy Greenspring investments in funds	144,255		152,658
Due from affiliates, net	Due from affiliates, net	20,091		18,830		Due from affiliates, net	23,232		29,017
Less: Amounts attributable to non-controlling interests in subsidiaries	Less: Amounts attributable to non-controlling interests in subsidiaries	17,097		13,832		Less: Amounts attributable to non-controlling interests in subsidiaries	21,628		19,432
Less: Amounts attributable to non-controlling interests in legacy Greenspring entities	Less: Amounts attributable to non-controlling interests in legacy Greenspring entities	165,345		194,480		Less: Amounts attributable to non-controlling interests in legacy Greenspring entities	144,255		152,658
Maximum exposure to loss	Maximum exposure to loss	$	112,096	$	112,043	Maximum exposure to loss	$	131,372	$	124,772

5. Investments

The Company’s investments consist of equity method investments primarily related to (i) investments in the StepStone Funds for which it serves as general partner or managing member but does not have a controlling financial interest and (ii) investments of Consolidated Funds. The Company’s equity interest in its equity method investments in the StepStone Funds typically does not exceed 1% in each fund. The Company’s share of the underlying net income or loss attributable to its equity interest in the funds is recorded in investment income in the condensed consolidated statements of income. Investment income attributable to the Consolidated Funds is recorded in investment income of Consolidated Funds. Investment income attributable to investments in certain legacy Greenspring funds for which the Company has no direct economic interests ~~are~~is recorded in legacy Greenspring investment income in the condensed consolidated statements of income.

Equity Method Investments

The Company’s equity method investments consist of the following:


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Investments of Consolidated Funds		$	14,312	$	—
Equity method investments:
Investments in funds(1)	Investments in funds(1)	109,102		107,045		Investments in funds(1)	$	129,768	$	115,187
Accrued carried interest allocations	Accrued carried interest allocations	1,126,386		1,480,515		Accrued carried interest allocations	1,331,778		1,227,173
Legacy Greenspring investments in funds and accrued carried interest allocations(2)	Legacy Greenspring investments in funds and accrued carried interest allocations(2)	888,872		1,334,581		Legacy Greenspring investments in funds and accrued carried interest allocations(2)	700,473		770,652
Total equity method investments	Total equity method investments	2,124,360		2,922,141		Total equity method investments	$	2,162,019	$	2,113,012
Total investments		$	2,138,672	$	2,922,141

_______________________________

(1)The Company’s investments in funds ~~was $138.6~~were $187.8 million and $147.5 million as of ~~December~~September 30, 2023 and March 31, ~~2022.~~2023, respectively. The consolidation of the Consolidated Funds results in the elimination of the Company’s investments in such funds. ~~No funds were consolidated as of March 31, 2022.~~

(2)Reflects investments in funds of ~~$165.3~~$144.3 million and ~~$194.5~~$152.7 million and carried interest allocations of ~~$723.5~~$556.2 million and ~~$1,140.1~~$618.0 million as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, respectively.

2928

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

~~Equity Method Investments~~

The Company recognized equity method income (loss) of the following:


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Carried interest allocations	Carried interest allocations	$	(47,047)	$	199,094	$	(241,699)	$	621,842	Carried interest allocations	$	56,956	$	(154,309)	$	120,793	$	(194,652)
Investment income (loss)	Investment income (loss)	(681)		7,230		(5,473)		20,841		Investment income (loss)	3,080		(3,691)		6,166		(4,792)
Legacy Greenspring carried interest allocations	Legacy Greenspring carried interest allocations	(88,921)		104,960		(371,200)		104,960		Legacy Greenspring carried interest allocations	(12,603)		(128,672)		(36,550)		(282,279)
Legacy Greenspring investment income (loss)		(8,966)		17,890		(32,927)		17,890
Legacy Greenspring investment loss										Legacy Greenspring investment loss	(3,966)		(15,357)		(6,832)		(23,961)
Total equity method income (loss)	Total equity method income (loss)	$	(145,615)	$	329,174	$	(651,299)	$	765,533	Total equity method income (loss)	$	43,467	$	(302,029)	$	83,577	$	(505,684)

The ~~decrease~~increase in carried interest allocations for the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the three and ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 was primarily attributable to unrealized ~~depreciation~~appreciation in the fair value of the underlying investments in the Company’s private equity funds. See note 2 for a discussion of the Company’s accounting policy for investments on a three-month lag.

As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, the Company’s investments in two SMAs each individually represented 10% or more of the total accrued carried interest allocations balance, and in the aggregate represented approximately ~~22%~~25% and ~~25%~~24%, respectively, of the total accrued carried interest allocations balance as of those dates. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, the Company’s investments in three and two commingled funds, respectively, each individually represented 10% or more of the total legacy Greenspring accrued carried interest allocations balance, and in the aggregate represented approximately ~~37%~~34% and ~~39%~~24%, respectively, of the total legacy Greenspring accrued carried interest allocations balances as of those dates.

Of the total accrued carried interest allocations balance as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022, $597.3~~2023, $697.4 million and ~~$770.0~~$644.5 million, respectively, were payable to affiliates and isare included in accrued carried interest-related compensation in the condensed consolidated balance sheets. Of the total legacy Greenspring investments in funds and accrued carried interest allocations balance as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022, $723.5~~2023, $556.2 million and ~~$1,140.1~~$618.0 million, respectively, were payable to employees who are considered affiliates of the Company and isare included in legacy Greenspring accrued carried interest-related compensation in the condensed consolidated balance sheets and ~~$165.3~~$144.3 million and ~~$194.5~~$152.7 million, respectively, are reflected as non-controlling interests in legacy Greenspring entities in the condensed consolidated balance sheets.

The Company evaluates each of its equity method investments to determine if any are considered significant as defined by the SEC. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022~~2023 and for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ no individual equity method investment held by the Company met the significance criteria. As a result, the Company is not required to provide separate financial statements for any of its equity method investments.

3029

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Investments of Consolidated Funds

The Company consolidates funds and entities when it is deemed to hold a controlling financial interest. ~~Beginning in the quarter ended December 31, 2022, the Company consolidated one investment fund for which it is deemed to have a controlling financial interest.~~ The activity of the Consolidated Funds is reflected within the condensed consolidated financial statements.

Investments held by the Consolidated Funds are summarized below:


		Fair Value as of				Percentage of Total Investments as of					Fair Value as of				Percentage of Total Investments as of
		December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023		September 30, 2023		March 31, 2023

Investments of Consolidated Funds:	Investments of Consolidated Funds:									Investments of Consolidated Funds:
Partnership and LLC interests (Cost of $9.4 million and $— million as of December 31, 2022 and March 31, 2022, respectively)		$	14,312	$	—	100	%	—	%
Equity securities (cost of $4.2 million and $— million as of September 30, 2023 and March 31, 2023, respectively)										Equity securities (cost of $4.2 million and $— million as of September 30, 2023 and March 31, 2023, respectively)	$	4,195	$	—	6	%	—	%
Partnership and LLC interests (cost of $43.8 million and $21.3 million as of September 30, 2023 and March 31, 2023, respectively)										Partnership and LLC interests (cost of $43.8 million and $21.3 million as of September 30, 2023 and March 31, 2023, respectively)	64,286		30,595		94	%	100	%

Total investments of Consolidated Funds	Total investments of Consolidated Funds	$	14,312	$	—	100	%	—	%	Total investments of Consolidated Funds	$	68,481	$	30,595	100	%	100	%

As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, no individual investment had a fair value greater than 5% of the Company’s total assets.

The following table summarizes net gains (losses) from investment activities of the Consolidated Funds:

Three Months Ended December 31, 2022 Nine Months Ended December 31, 2022
Net Realized Gains (Losses) on Investments Net Unrealized Gains (Losses) on Investments Net Realized Gains (Losses) on Investments Net Unrealized Gains (Losses) on Investments
Investments of Consolidated Funds:
Partnership and LLC interests $ — $ 4,895 $ — $ 4,895
Total investments of Consolidated Funds $ — $ 4,895 $ — $ 4,895


	Three Months Ended September 30, 2023				Six Months Ended September 30, 2023

	Net Realized Gains (Losses) on Investments		Net Unrealized Gains (Losses) on Investments		Net Realized Gains (Losses) on Investments		Net Unrealized Gains (Losses) on Investments


Investments of Consolidated Funds	$	—	$	8,772	$	—	$	11,134

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

6. Fair Value Measurements

The Company measures certain assets and liabilities at fair value on a recurring basis. The following tables provide details regarding the classification of these assets and liabilities within the fair value hierarchy as of the dates presented:

Financial Instruments of the Company


		As of December 31, 2022									As of September 30, 2023
		Level I		Level II		Level III		Total			Level I		Level II		Level III		Total

Liabilities	Liabilities									Liabilities
Contingent consideration obligations	Contingent consideration obligations	$	—	$	—	$	37,473	$	37,473	Contingent consideration obligations	$	—	$	—	$	32,352	$	32,352
Liability classified awards		—		—		3,800		3,800

Total liabilities	Total liabilities	$	—	$	—	$	41,273	$	41,273	Total liabilities	$	—	$	—	$	32,352	$	32,352

As of March 31, 2022
Level I Level II Level III Total
Liabilities
Contingent consideration obligations $ — $ — $ 28,025 $ 28,025
Total liabilities $ — $ — $ 28,025 $ 28,025

~~For the liabilities presented in the tables above, there were no changes in fair value hierarchy levels during the three and nine months ended December 31, 2022 and 2021.~~

~~The changes in the fair value of Level III financial instruments of the Company are set forth below:~~

Three Months Ended December 31,
2022 2021
Contingent consideration obligations Liability classified awards Total Contingent consideration obligations Liability classified awards Total
Balance, beginning of period: $ 35,656 $ — $ 35,656 $ 18,851 $ — $ 18,851
Additions — 3,500 3,500 — — —
Change in fair value 1,989 300 2,289 1,624 — 1,624
Settlements (172) — (172) (222) — (222)
Balance, end of period: $ 37,473 $ 3,800 $ 41,273 $ 20,253 $ — $ 20,253
Changes in unrealized losses included in earnings related to financial liabilities still held at the reporting date $ 1,989 $ 3,800 $ 5,789 $ 1,624 $ — $ 1,624


	As of March 31, 2023
	Level I		Level II		Level III		Total








Liabilities
Contingent consideration obligations	$	—	$	—	$	36,745	$	36,745
Total liabilities	$	—	$	—	$	36,745	$	36,745

3230

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Nine Months Ended December 31,
2022 2021
Contingent consideration obligations Liability classified awards Total Contingent consideration obligations Liability classified awards Total
Balance, beginning of period: $ 28,025 $ — $ 28,025 $ 1,541 $ — $ 1,541
Additions — 3,500 3,500 17,769 — 17,769
Change in fair value 9,949 300 10,249 1,624 — 1,624
Settlements (501) — (501) (681) — (681)
Balance, end of period: $ 37,473 $ 3,800 $ 41,273 $ 20,253 $ — $ 20,253
Changes in unrealized losses included in earnings related to financial liabilities still held at the reporting date $ 9,949 $ 3,800 $ 13,749 $ 1,624 $ — $ 1,624

~~Contingent Consideration~~

~~In connection with~~For the ~~Greenspring acquisition,~~financial instruments presented in the ~~Company recorded a contingent consideration liability of $17.8 million~~tables above, there were no changes in fair value hierarchy levels during the three and six months ended September 30, ~~2021. See note 14 for more information.~~2023 and 2022.

A reconciliation from the beginning balance to the closing balance of Level III financial instruments of the Company are set forth below:


	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
Contingent consideration obligations
Balance, beginning of period:	$	35,332	$	31,121	$	36,745	$	28,025
Additions	41		—		41		—
Change in fair value	(3,021)		4,704		(4,288)		7,960
Settlements	—		(169)		(146)		(329)
Balance, end of period:	$	32,352	$	35,656	$	32,352	$	35,656

Changes in unrealized (gains) losses included in earnings related to financial instruments still held at the reporting date	$	(3,021)	$	4,704	$	(4,288)	$	7,960

Contingent Consideration

The fair value of the contingent consideration obligation liabilities ~~are~~is based on a discounted cash flow analysis using a probability-weighted average estimate of certain performance targets, including revenue levels. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the contingent consideration liability may differ materially from the current estimate. The significant unobservable inputs required to value the contingent consideration obligation liabilities primarily relate to the future expected revenues and the discount ~~rates~~rate applied to the expected future revenues and payments of obligations which ~~ranged from 8% to 10%~~was 9% as of ~~December 31, 2022.~~September 30, 2023. The contingent consideration obligation liabilities are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets. Changes in the fair value of the liabilities are included in general, administrative and other expenses in the condensed consolidated statements of income. ~~In February 2022, the Company amended the contingent consideration arrangement in respect~~

Financial Instruments of the Greenspring acquisition whereby a portion of the contingent consideration liability otherwise payable to the sellers will be used to fund compensation arrangements with certain employees of the Company, which will be payable following the end of the earn-out period. As a result, the contingent consideration liability is recorded net of the fair value of amounts payable to certain employees.Consolidated Funds

~~Liability Classified Awards~~


	As of September 30, 2023
	Level I		Level II		Level III		Total
Assets
Equity securities	$	—	$	—	$	3,685	$	3,685
Partnership and LLC interests	—		—		8,644		8,644
Total assets	$	—	$	—	$	12,329	$	12,329

During the three months ended December 31, 2022, the Company granted limited liability company profits interests in one of its consolidated subsidiaries to certain employees. The interests are accounted for as liability classified awards. See note 9 for more information.

The fair value of the liability classified awards is based on an option pricing model. The assumptions used in the analysis are inherently subjective; therefore, the ultimate settlement amount of the liability classified awards may differ materially from the current estimate. The option price assumption in the option pricing model is based on a discounted cash flow analysis. The significant unobservable inputs required to value the liability classified awards primarily relate to the future expected volatility for the option pricing model and future expected earnings and related discount rate applied for the discounted cash flow analysis. As of December 31, 2022, the volatility input used in the option pricing model was 40% and the discount applied to the future expected earnings in the discounted cash flow analysis was 24%. The liability classified awards are included in accrued compensation and benefits in the condensed consolidated balance sheets. Changes in the fair value of the liabilities are included in equity-based compensation expense in the condensed consolidated statements of income.


	As of March 31, 2023
	Level I		Level II		Level III		Total
Assets
Partnership and LLC interests	$	—	$	—	$	6,901	$	6,901
Total assets	$	—	$	—	$	6,901	$	6,901

3331

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

~~Financial Instruments~~For the financial instruments presented in the tables above, there were no changes in fair value hierarchy levels during the three and six months ended September 30, 2023. There were no financial instruments held by Consolidated Funds as of ~~Consolidated Funds~~September 30, 2022.

Investment Funds

The Company generally values its investment funds, which are organized as partnership and LLC interests, using the NAV per share equivalent calculated by the investment manager as a practical expedient in determining an independent fair value. The Company does not categorize within the fair value hierarchy investments where fair value is measured using the net asset value per share practical expedient. As of ~~December~~September 30, 2023 and March 31, ~~2022,~~2023, investments with a combined fair value of ~~$14.3~~$56.2 million and $23.7 million, respectively, are excluded from presentation in the fair value hierarchy as the fair value of these investments were measured at net asset value. As of September 30, 2023 and March 31, 2023, investments with a combined fair value of $12.3 million and $6.9 million, respectively, were classified as Level III investments. The significant unobservable input used to value these investments classified as Level III are the discounts to recent transaction prices.

A reconciliation from the beginning balance to the closing balance of Level III financial instruments of Consolidated Funds are set forth below:


	Three Months Ended September 30,		Six Months Ended September 30,
	2023			2023
Partnership and LLC interests
Balance, beginning of period:	$	2,902		$	6,901
Transfers into Level III	1,076			1,076
Transfers out of Level III	(1,067)			(6,134)
Purchases	9,418			10,486


Balance, end of period:	$	12,329		$	12,329

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

7. Intangibles and Goodwill

Intangible assets consist of management contracts providing economic rights to management and advisory fees and client relationships related to future fundraising, as obtained through the Company’s acquisitions of other businesses.

Intangible assets, net consists of the following:


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Management contracts	Management contracts	$	352,002	$	352,002	Management contracts	$	352,002	$	352,002
Client relationships	Client relationships	96,650		96,650		Client relationships	96,650		96,650
Service agreements	Service agreements	9,537		9,537		Service agreements	9,537		9,537
Less: Accumulated amortization	Less: Accumulated amortization	(92,674)		(60,063)		Less: Accumulated amortization	(124,867)		(103,544)
Intangible assets, net	Intangible assets, net	$	365,515	$	398,126	Intangible assets, net	$	333,322	$	354,645

Amortization expense related to intangible assets was ~~$10.9~~$10.7 million and $~~11.0~~10.9 million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$32.6~~$21.3 million and ~~$13.4~~$21.7 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. These amounts are included in general, administrative and other expenses in the condensed consolidated statements of income.

At ~~December 31, 2022,~~September 30, 2023, the expected future amortization of finite-lived intangible assets is as follows:


Remainder of ~~FY2023~~FY2024	$	~~10,871~~
~~FY2024~~	~~42,645~~21,323
FY2025	41,955
FY2026	41,764
FY2027	41,730
FY2028	41,713
Thereafter	~~186,550~~144,837
Total	$	~~365,515~~333,322

The carrying value of goodwill was $580.5 million as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022.~~2023. The Company determined there was no indication of goodwill impairment as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022.~~2023.

3433

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

8. Debt Obligations

~~In September 2021, the~~The Company ~~entered into~~is party to a credit agreement, as amended in April 2023, with various lenders (the “Credit Agreement”) ~~in connection with the Greenspring acquisition. The Credit Agreement~~that was arranged by JPMorgan Chase Bank, N.A., as the administrative agent, and provides for a $225.0 million multicurrency revolving credit facility (the “Revolver”) with a five-year maturity. As of ~~December 31, 2022,~~September 30, 2023, the Company had ~~$83.2~~$123.6 million outstanding on the Revolver, net of debt issuance costs.

The Company’s debt obligations consist of the following:


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Revolver	Revolver	$	85,000	$	65,000	Revolver	$	125,000	$	100,000
Less: Debt issuance costs	Less: Debt issuance costs	(1,767)		(2,121)		Less: Debt issuance costs	(1,414)		(1,649)
Total debt obligations	Total debt obligations	$	83,233	$	62,879	Total debt obligations	$	123,586	$	98,351

Borrowings under the Revolver bear interest at a variable rate per annum. The Company may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a ~~LIBOR~~Term SOFR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a Sterling Overnight Index Average (“SONIA”) loan, (iv) in the case of any borrowing denominated in Swiss Francs, a Swiss Average Rate Overnight (“SARON”) loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan. Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month ~~LIBOR, multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement),~~Term SOFR, plus ~~1.00%~~1.10%, (ii) in the case of a ~~LIBOR~~Term SOFR rate loan, the ~~LIBOR~~Term SOFR rate ~~multiplied by the Statutory Reserve Rate~~ plus ~~2.00%~~2.10%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement) plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%., in certain cases subject to applicable interest rate floors. The weighted-average interest rate in effect for the Revolver as of ~~December 31, 2022~~September 30, 2023 was ~~6.42%~~7.48%.

Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date. Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date. The maturity date for the Revolver is September 20, 2026.

The Revolver bears a fee on undrawn commitments equal to 0.25% per annum if total utilization of revolving commitments is equal to or greater than 50% and 0.35% per annum if total utilization of revolving commitments is less than 50%.

The carrying value of the Revolver approximates fair value, as the loan is subject to variable interest rates that adjust with changes in market rates and market conditions and the current interest rate approximates that which would be available under similar financial arrangements.

3534

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Under the terms of the Credit Agreement, certain of the Company’s assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things: limit the Company’s ability to incur indebtedness; create, incur or allow liens; transfer or dispose of assets; merge with other companies; make certain investments; pay dividends or make distributions; engage in new or different lines of business; and engage in transactions with affiliates. The Credit Agreement also contains financial covenants requiring the Company to maintain a total net leverage ratio and a minimum total of fee-earning assets under management. As of ~~December 31, 2022,~~September 30, 2023, the Company was in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.

The Company can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $10.0 million. Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver. As of ~~December 31, 2022,~~September 30, 2023, the Company had outstanding letters of credit totaling ~~$7.8~~$7.9 million.

9. Equity-Based Compensation

The change in unvested RSUs is as follows:

Number of RSUs Weighted-Average Grant-Date Fair Value Per RSU
Balance as of March 31, 2022 2,087,324 $ 20.40
Granted 16,429 $ 28.91
Vested (597,698) $ (18.49)
Forfeited (34,073) $ (21.89)
Balance as of December 31, 2022 1,471,982 $ 21.36

In November 2022, one the Company’s non-wholly owned subsidiaries issued new partnership interests to certain employees with a grant date fair value of $6.1 million, vesting over six years. The issuance did not impact the Company’s fully diluted interest in the subsidiary.


	Number of RSUs	Weighted-Average Grant-Date Fair Value Per RSU
Balance as of March 31, 2023	1,775,732	$	22.46
Granted	17,371	$	31.66
Vested	(595,993)	$	(18.39)
Forfeited	(37,364)	$	(23.05)
Balance as of September 30, 2023	1,159,746	$	24.67

Unvested Partnership Units

All Class B2 units will automatically convert into Class B units upon final vesting in 2024 and unitholders will be entitled to purchase from the Company one share of Class B common stock for each Class B unit at its par value. Prior to vesting, holders of Class B2 units do not have the right to receive any distributions from the Partnership, other than tax-related distributions.

As of ~~December 31, 2022,~~September 30, 2023, there were 2,566,566 Class B2 units outstanding. During the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, none of the outstanding Class B2 units were forfeited. As of ~~December 31, 2022, 898,298~~September 30, 2023, 449,149 Class B2 units were unvested and ~~1,668,268~~2,117,417 Class B2 units were vested.

As of ~~December 31, 2022, $35.0~~September 30, 2023, $32.5 million of unrecognized non-cash compensation expense in respect of equity-based awards remained to be recognized over a weighted-average period of approximately ~~3.3~~3.7 years.

Liability Classified Awards

For the three and six months ended September 30, 2023, the Company recognized $1.2 million and $5.1 million, respectively, of expense related to the fair value of liability classified awards within equity-based compensation expense in the condensed consolidated statements of income. For the three and six months ended September 30, 2023 and 2022, no amounts were paid related to the settlement of liability classified awards.

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

~~Liability Classified Awards~~

In November 2022, the Company issued a profits interest in SPW to certain employees of the SPW team and concurrently entered into an option agreement which provides that, (i) StepStone has the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027, in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC (formerly known as Conversus Holdings LLC), has the right to put the profits interest to StepStone on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless the Company elects to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of the Company’s Class A common stock, and, in either case, rights under one or more tax receivable agreements.

The Company accounted for the profits interest and option agreement as a single unit of account as a liability classified equity-based award. There are no vesting provisions or service requirements related to the award. For the three and nine months ended December 31, 2022, the Company recognized $3.8 million of expense related to the fair value of the liability classified awards within equity-based compensation expense in the condensed consolidated statements of income. For the three and nine months ended December 31, 2022 and 2021, no amounts were paid related to settlement for liability classified awards.

10. Income Taxes

In connection with the exchanges of Class B units and Class C units of the Partnership for Class A common stock by certain limited partners of the Partnership during the three months ended September 30, 2023, the Company recorded an increase to deferred tax assets as of ~~$4.8~~September 30, 2023 of $3.3 million and a ~~net increase~~decrease in the valuation allowance of ~~$0.3~~$1.5 million. Additionally, in connection with the exchange transactions, the Company recorded a corresponding Tax Receivable Agreements liability of ~~$6.1~~$6.5 million, representing 85% of the incremental net cash tax savings for the Company due to the exchanging limited partners. The Company made no payments ~~of $1.1 million and $0.1 million~~ during the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$6.0~~$7.7 million and ~~$0.7~~$4.8 million during the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, under the Tax Receivable Agreements. As of ~~December 31, 2022,~~September 30, 2023, the Company’s total Tax Receivable Agreements liability was ~~$199.7~~$198.2 million. See note 12 for more information.

The Company’s effective tax rate was ~~5.1%~~11.5% and ~~11.1%~~10.0% for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~6.3%~~13.1% and ~~4.0%~~6.5% for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. The Company’s overall effective tax rate in each of the periods described above is less than the statutory ~~rate. The primary~~ rate ~~difference for the three and nine months ended December 31, 2022 and 2021 relates to~~as a portion of income ~~that~~ was allocated to non-controlling interests asand the tax liability on such income is borne by the holders of ~~such~~ non-controlling interests. ~~Additionally, during~~The primary rate difference was due to an increase in foreign tax expense for the ~~nine~~three and six months ended ~~December 31, 2021,~~September 30, 2023.Additionally, for the ~~Company~~six months ended September 30, 2022, there were certain tax expense adjustments that were recorded ~~a benefit of $25.3 million, related~~ to the ~~full release of~~Company’s outside basis difference in the ~~valuation allowance as a result of~~Partnership that did not reoccur in the ~~deferred tax liability recorded in connection with the Greenspring acquisition.~~six months ended September 30, 2023.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and adjusts the valuation allowance when it is more-likely-than-not that all or a portion of the deferred tax assets may not be realized.

As of ~~December 31, 2022,~~September 30, 2023, the Company has not recorded any unrecognized tax benefits and does not expect there to be any material changes to uncertain tax positions within the next 12 months.

3736

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

11. Earnings Per Share

Basic and diluted earnings per share of Class A common stock are presented for the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 and ~~2021.~~2022. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)									(in thousands, except share and per share amounts)
Numerator:	Numerator:									Numerator:
Net income (loss) attributable to StepStone Group Inc. – Basic	Net income (loss) attributable to StepStone Group Inc. – Basic	$	(6,938)	$	48,346	$	(47,199)	$	152,070	Net income (loss) attributable to StepStone Group Inc. – Basic	$	26,225	$	(29,221)	$	47,494	$	(40,261)
Incremental income from assumed vesting of RSUs	Incremental income from assumed vesting of RSUs	—		886		—		3,435		Incremental income from assumed vesting of RSUs	326		—		444		—
Incremental income from assumed vesting and exchange of Class B2 units	Incremental income from assumed vesting and exchange of Class B2 units	—		1,931		—		6,075		Incremental income from assumed vesting and exchange of Class B2 units	1,017		—		1,829		—
Net income (loss) attributable to StepStone Group Inc. – Diluted	Net income (loss) attributable to StepStone Group Inc. – Diluted	$	(6,938)	$	51,163	$	(47,199)	$	161,580	Net income (loss) attributable to StepStone Group Inc. – Diluted	$	27,568	$	(29,221)	$	49,767	$	(40,261)

Denominator:	Denominator:									Denominator:
Weighted-average shares of Class A common stock outstanding – Basic	Weighted-average shares of Class A common stock outstanding – Basic	62,192,899		57,875,758		61,583,215		46,247,353		Weighted-average shares of Class A common stock outstanding – Basic	62,858,468		61,407,834		62,846,708		61,276,707
Assumed vesting of RSUs	Assumed vesting of RSUs	—		1,125,798		—		1,390,538		Assumed vesting of RSUs	801,014		—		601,620		—
Assumed vesting and exchange of Class B2 units	Assumed vesting and exchange of Class B2 units	—		2,481,677		—		2,480,591		Assumed vesting and exchange of Class B2 units	2,538,647		—		2,521,725		—
Weighted-average shares of Class A common stock outstanding – Diluted	Weighted-average shares of Class A common stock outstanding – Diluted	62,192,899		61,483,233		61,583,215		50,118,482		Weighted-average shares of Class A common stock outstanding – Diluted	66,198,129		61,407,834		65,970,053		61,276,707

Net income (loss) per share of Class A common stock:	Net income (loss) per share of Class A common stock:									Net income (loss) per share of Class A common stock:
Basic	Basic	$	(0.11)	$	0.84	$	(0.77)	$	3.29	Basic	$	0.42	$	(0.48)	$	0.76	$	(0.66)
Diluted	Diluted	$	(0.11)	$	0.83	$	(0.77)	$	3.22	Diluted	$	0.42	$	(0.48)	$	0.75	$	(0.66)

Diluted earnings per share of Class A common stock is computed by dividing net income (loss) attributable to SSG, giving consideration to the reallocation of net income between holders of Class A common stock and non-controlling interests, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities, if any.

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to SSG and therefore are not participating securities. As a result, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included.

The calculation of diluted earnings per share excludes ~~46,420,141~~46,314,543 Class B units and ~~2,514,085~~1,962,131 Class C units of the Partnership outstanding as of ~~December 31, 2022,~~September 30, 2023, and ~~47,499,673~~46,716,897 Class B units and 2,928,824 Class C units of the Partnership outstanding as of ~~December 31, 2021,~~September 30, 2022, which are exchangeable into Class A common stock under the if-converted method, as the inclusion of such shares would be anti-dilutive.

3837

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

~~The~~As the Company was in a net loss position for the three and six months ended September 30, 2022, the calculation of diluted earnings per share ~~for the three and nine months ended December 31, 2022~~ excludes ~~1,471,982~~potential shares of Class A common stock for 1,472,164 outstanding RSUs, 2,566,566 Class B2 units and 23,418 Class B units issuable pursuant to anti-dilution rights in connection with the vesting of Class B2 units that are convertible into Class A common stock under the if-converted method, as the inclusion of such shares would be anti-dilutive.

12. Related Party Transactions

The Company considers its senior executives, employees and equity method investments to be related parties. A substantial portion of the Company’s management and advisory fees and carried interest allocations is earned from various StepStone Funds that are considered equity method investments. The Company earned net management and advisory fees from the StepStone Funds of ~~$88.4~~$96.3 million and ~~$69.2~~$78.1 million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$245.9~~$189.1 million and ~~$165.7~~$157.5 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. Carried interest allocation revenues earned from the StepStone Funds totaled ~~$(47.0)~~$57.0 million and ~~$199.1~~$(154.3) million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$(241.7)~~$120.8 million and ~~$621.8~~$(194.7) million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. Legacy Greenspring carried interest allocation revenues earned from certain legacy Greenspring funds for which the Company has no direct economic interests totaled ~~$(88.9)~~$(12.6) million and ~~$105.0~~$(128.7) million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$(371.2)~~$(36.6) million and ~~$105.0~~$(282.3) million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively.

Due from affiliates in the condensed consolidated balance sheets consists primarily of fees and accounts receivable from the StepStone Funds, advances made on behalf of the StepStone Funds for the payment of certain organization and operating costs and expenses for which the Company is subsequently reimbursed, amounts due from employees and loans due from affiliated entities, as set forth below.


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Amounts receivable from StepStone Funds	Amounts receivable from StepStone Funds	$	20,162	$	19,027	Amounts receivable from StepStone Funds	$	28,782	$	33,813
Amounts receivable from employees	Amounts receivable from employees	2,207		342		Amounts receivable from employees	8,547		7,016
Amounts receivable from loans	Amounts receivable from loans	13,380		—		Amounts receivable from loans	13,721		13,493
Total due from affiliates	Total due from affiliates	$	35,749	$	19,369	Total due from affiliates	$	51,050	$	54,322

Due to affiliates in the condensed consolidated balance sheets consists primarily of amounts payable to certain non-controlling interest holders in connection with the Tax Receivable Agreements, amounts payable to the StepStone Funds and distributions payable to certain employee equity holders of consolidated subsidiaries, as set forth below.


		As of					As of
		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
Amounts payable to non-controlling interest holders in connection with Tax Receivable Agreements	Amounts payable to non-controlling interest holders in connection with Tax Receivable Agreements	$	199,740	$	197,204	Amounts payable to non-controlling interest holders in connection with Tax Receivable Agreements	$	198,179	$	199,307
Amounts payable to StepStone Funds	Amounts payable to StepStone Funds	71		198		Amounts payable to StepStone Funds	5,550		4,796
Distributions payable to certain employee equity holders of consolidated subsidiaries	Distributions payable to certain employee equity holders of consolidated subsidiaries	1,541		1,953		Distributions payable to certain employee equity holders of consolidated subsidiaries	774		1,321
Total due to affiliates	Total due to affiliates	$	201,352	$	199,355	Total due to affiliates	$	204,503	$	205,424

3938

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The Company made no payments ~~of $1.1 million and $0.1 million~~ during the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$6.0~~$7.7 million and ~~$0.7~~$4.8 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, under the Tax Receivable Agreements.

13. Stockholders’ Equity and Redeemable Non-Controlling Interests

Stockholders’ Equity

The Company has two classes of common stock outstanding, Class A common stock and Class B common stock. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the Company’s stockholders for their vote or approval. Holders of Class A common stock are entitled to receive dividends when and if declared by the board of directors. Holders of the Class B common stock are not entitled to dividends in respect of their shares of Class B common stock.

In connection with the Greenspring acquisition, the limited partnership agreement of the Partnership was amended to create new Class C limited partnership interests and to admit the new limited partners that received Class C units as consideration for the Greenspring acquisition. The Class C limited partnership interests of the Partnership have substantially the same rights and obligations as are applicable to the existing holders of Class B units of the Partnership. The Company has no ownership interest in the Class C units, which are held by certain employees of the Company. The Company has ~~also~~ entered into an agreement with the Class C limited partners of the Partnership (the “Class C Exchange Agreement”) to allow for the exchange of Class C units to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions.

The following table shows a rollforward of the Company’s shares of common stock outstanding since March 31, ~~2022:~~2023:


		Class A Common Stock	Class B Common Stock		Class A Common Stock	Class B Common Stock
March 31, 2022		61,141,306	47,149,673
March 31, 2023				March 31, 2023	62,834,791	46,420,141

Class A common stock issued in exchange for Class B partnership units	Class A common stock issued in exchange for Class B partnership units	729,532	(729,532)	Class A common stock issued in exchange for Class B partnership units	105,598	(105,598)
Class A common stock issued in exchange for Class C partnership units	Class A common stock issued in exchange for Class C partnership units	414,739	—	Class A common stock issued in exchange for Class C partnership units	551,954	—
Class A common stock issued for vesting of RSUs, net of shares withheld for employee taxes	Class A common stock issued for vesting of RSUs, net of shares withheld for employee taxes	487,345	—	Class A common stock issued for vesting of RSUs, net of shares withheld for employee taxes	576,609	—
December 31, 2022		62,772,922	46,420,141
September 30, 2023				September 30, 2023	64,068,952	46,314,543

The Company has 25,000,000 authorized shares of preferred stock, par value of $0.001 per share, and as of ~~December 31, 2022,~~September 30, 2023, no shares of preferred stock were issued or outstanding.

In ~~December 2022,~~September 2023, the Company issued ~~296,756~~105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for ~~296,756~~105,598 Class B units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to the Company. The Company also issued ~~414,739~~551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for ~~414,739~~551,954 Class C units in accordance with the elective exchange notices submitted pursuant to ~~an agreement with~~ the Class C ~~limited partners (the “Class C~~ Exchange ~~Agreement”) to allow for exchange~~Agreement and a corresponding number of Class CA units of the Partnership were issued to ~~shares of Class A common stock of~~ the ~~Company on a one-for-one basis, subject to certain restrictions.~~Company.

4039

StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

In September 2022, the Company issued 175,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 175,000 Class B units in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement to allow for exchange of Class B units of the Partnership to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to the Company.

In June 2022, the Company issued 257,776 shares of Class A common stock to certain limited partners of the Partnership in exchange for 257,776 Class B units in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to the Company.

The reallocation adjustment between SSG stockholders’ equity, non-controlling interests in the Partnership and non-controlling interests in subsidiaries relates to the impact of changes in economic ownership percentages during the period and adjusting previously recorded equity transactions to the economic ownership percentage as of the end of each reporting period.

Dividends and distributions are reflected in the condensed consolidated statements of stockholders’ equity when declared by the board of directors. Dividends are made to Class A common stockholders and distributions are made to limited partners of the Partnership and holders of non-controlling interests in subsidiaries.

On ~~November~~August 3, ~~2022,~~2023, the Company announced a quarterly cash dividend of ~~$0.20~~$0.21 per share of Class A common stock, which was paid on ~~December~~September 15, ~~2022~~2023 to holders of record at the close of business on ~~November 30, 2022.~~August 31, 2023.

Redeemable Non-Controlling Interests

The following table summarizes the activities associated with the redeemable non-controlling interests in Consolidated Funds:

Three Months Ended December 31, Nine Months Ended December 31,
2022 2022
Beginning balance $ — $ —
Contributions 4,575 4,575
Net income 391 391
Ending balance $ 4,966 $ 4,966

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

~~14. Business Combinations~~

~~Greenspring Acquisition~~

On September 20, 2021, the Company completed the acquisition of 100% of the equity of Greenspring Associates, Inc. and certain of its affiliates (collectively, “Greenspring”) in exchange for (i) cash consideration of approximately $185 million, net of an agreed upon adjustment based upon Greenspring’s net working capital balance at the closing date, (ii) 12,686,756 shares of Class A common stock and (iii) 3,071,519 newly issued Class C units of the Partnership (the “Greenspring acquisition”), in each case subject to certain adjustments (including customary adjustments for cash, debt, debt-like items, transaction expenses and net working capital at closing). The transaction agreement also provides for the payment of an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. The results of Greenspring’s operations have been included in the condensed consolidated financial statements effective September 20, 2021. The acquisition of Greenspring expanded the Company’s leadership in private markets solutions, providing added scale in venture capital and growth equity, and offering clients expanded access to the global innovation economy.

~~The aggregate purchase price for the acquisition of Greenspring and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows:~~


~~Acquisition date fair value of consideration transferred:~~
~~Cash consideration~~	$	~~186,577~~
~~Class A common stock~~	~~558,598~~
~~Class C units of the Partnership~~	~~135,239~~
~~Contingent consideration~~	~~17,769~~
~~Total purchase price~~	$	~~898,183~~

~~Estimated fair value of assets acquired and liabilities assumed:~~
~~Cash and short-term receivables~~	$	~~5,725~~
~~Legacy Greenspring investments in funds and accrued carried interest allocations(1)~~	~~1,203,299~~
~~Lease right-of-use assets, net~~	~~2,585~~
~~Other assets and receivables~~	~~2,146~~
~~Finite-lived intangible assets—contractual rights: management contracts~~	~~310,944~~
~~Finite-lived intangible assets—client relationships~~	~~96,650~~
~~Finite-lived intangible assets—contractual rights: service agreements~~	~~9,537~~
~~Goodwill~~	~~573,750~~
~~Deferred income taxes~~	~~(95,884)~~
~~Accrued expenses and other liabilities~~	~~(4,685)~~
~~Legacy Greenspring accrued carried interest-related compensation(1)~~	~~(1,045,157)~~
~~Lease liabilities~~	~~(2,585)~~
~~Non-controlling interests in legacy Greenspring entities(1)~~	~~(158,142)~~
~~Total~~	$	~~898,183~~

~~_______________________________~~

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

~~(1)~~Represents investments in funds and carried interest allocations attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. Such amounts are attributable to employees and therefore have been reflected as non-controlling interests in legacy Greenspring entities and legacy Greenspring accrued carried interest-related compensation, respectively.

For the nine months ended December 31, 2021, the Company incurred $13.8 million of acquisition-related costs that were expensed as incurred and included in general, administrative and other expenses in the condensed consolidated statements of income.

The Company allocated $320.5 million and $96.7 million of the purchase price to the fair value of contractual rights and client relationships, respectively, which is being amortized over a weighted-average amortization period of 10.0 years. The $573.8 million of goodwill primarily related to Greenspring’s assembled workforce and business synergies expected to be realized from the transaction. This goodwill is not deductible for tax purposes.

The amount of revenues and net income of Greenspring (including amounts attributable to legacy Greenspring entities) from the acquisition date of September 20, 2021 to December 31, 2021 were approximately $127 million and $28 million, respectively.

~~The following supplemental unaudited pro forma information assumes the Greenspring acquisition, as well as the Reorganization and IPO, had been consummated as of April 1, 2020:~~

Three Months Ended December 31, 2021 Nine Months Ended December 31, 2021
Revenues $ 410,465 $ 1,505,300
Net income attributable to StepStone Group Inc. 48,346 134,181

The Company’s fiscal year ends on March 31, and prior to the transaction, Greenspring’s fiscal year ended on December 31. To comply with SEC rules and regulations for companies with different fiscal year ends, the pro forma condensed combined financial information has been prepared utilizing periods that differ by less than 93 days. The unaudited pro forma information for the three and nine months ended December 31, 2021 combines the Company’s historical unaudited condensed consolidated statements of income and Greenspring’s historical unaudited condensed combined statements of income for the three and nine months ended December 31, ~~2021~~.

The supplemental unaudited pro forma information is based on estimates and assumptions believed reasonable and are not necessarily indicative of the Company’s consolidated results in future periods or the results that actually would have been realized had the Greenspring acquisition been completed to create a combined entity during the periods presented. The pro forma amounts have been calculated after reflecting the following adjustments that were directly attributable to the Reorganization, IPO, Greenspring acquisition and the related debt issuance used to fund a portion of the cash consideration, as if the transactions were consummated on April 1, 2020:

~~Reorganization and IPO~~

•~~adjustments to include compensation expense associated with the 2.5 million RSUs issued in connection with the IPO;~~

•~~adjustments on interest expense to reflect the repayment of outstanding debt using a portion of the IPO proceeds;~~

•~~adjustments to include federal and state income taxes for the Company’s share of taxable income generated by the Partnership; and~~

~~StepStone Group Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(in thousands, except share and per share amounts and where noted)~~

•~~adjustments to reflect the pro-rata economic ownership attributable to the Company.~~

~~Debt Financing~~

•~~adjustments to include interest expense related to the Revolver used to fund a portion of the cash consideration.~~

~~Greenspring Acquisition~~

•~~adjustments to include the impact of additional amortization of acquired intangible assets that would have been charged;~~

•~~adjustments to include the issuance of Class A common stock of the Company and Class C units of the Partnership as consideration for the transaction;~~

•~~adjustments to reflect the pro-rata economic ownership attributable to the Company;~~

•~~adjustments to reflect the tax effects of the Greenspring acquisition and including Greenspring in the Company’s results; and~~

•~~adjustments to include acquisition-related transaction costs in earnings for the nine months ended December 31, 2020.~~


	Three Months Ended September 30,		Six Months Ended September 30,
	2023		2023
Beginning balance	$	41,618	$	24,530

Contributions	13,205		28,740

Net income	4,449		6,002
Ending balance	$	59,272	$	59,272

~~15.~~14. Commitments and Contingencies

Litigation

In the ordinary course of business, and from time to time, the Company may be subject to various legal, regulatory and/or administrative proceedings. The Company accrues a liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Although there can be no assurance of the outcome of such proceedings, based on information known by management, the Company does not expect a potential liability related to any current legal proceedings or claims that would individually or in the aggregate materially affect its condensed consolidated financial statements as of ~~December 31, 2022.~~September 30, 2023.

Lease Commitments

The Company leases offices in 2527 cities in ~~the~~ North America, South America, Europe, Asia and Australia, and certain equipment subject to operating lease agreements expiring through 2039, some of which may include options to extend or terminate the lease. As of ~~December 31, 2022,~~September 30, 2023, there were no finance leases outstanding.

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StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

The components of lease expense included in general, administrative and other expenses in the condensed consolidated statements of income were as follows:


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Operating lease cost(1)(2)	Operating lease cost(1)(2)	$	3,481	$	2,855	$	6,893	$	8,215	Operating lease cost(1)(2)	$	3,990	$	368	$	7,827	$	3,412
Variable lease cost	Variable lease cost	236		230		733		699		Variable lease cost	164		273		318		497
Sublease income	Sublease income	(414)		(416)		(1,203)		(1,272)		Sublease income	(462)		(443)		(836)		(789)
Total lease cost	Total lease cost	$	3,303	$	2,669	$	6,423	$	7,642	Total lease cost	$	3,692	$	198	$	7,309	$	3,120

_______________________________

(1)Operating lease cost includes an immaterial amount of short-term leases.

(2)The ~~nine~~three and six months ended ~~December 31,~~September 30, 2022 include a gain of $2.7 million related to lease remeasurement adjustments due to a reduction in lease terms.

Supplemental cash flow information related to leases was as follows:


		Nine Months Ended December 31,							Six Months Ended September 30,
		2022			2021				2023			2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:							Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	Operating cash flows used for operating leases	$	7,448		$	7,343		Operating cash flows used for operating leases	$	6,456		$	4,557
Weighted-average remaining lease term for operating leases (in years)	Weighted-average remaining lease term for operating leases (in years)	12.2			7.8			Weighted-average remaining lease term for operating leases (in years)	11.8			7.9
Weighted-average discount rate for operating leases	Weighted-average discount rate for operating leases	4.5		%	2.7		%	Weighted-average discount rate for operating leases	4.6		%	3.4		%

As of ~~December 31, 2022,~~September 30, 2023, maturities of operating lease liabilities were as follows:



Remainder of ~~FY2023~~FY2024	$	~~3,280~~
~~FY2024~~	~~12,894~~5,972
FY2025	~~14,168~~14,838
FY2026	~~15,134~~15,960
FY2027	~~14,319~~14,641
FY2028	12,603
Thereafter	~~108,586~~97,863
Total lease liabilities	~~168,381~~161,877
Less: Imputed interest	~~(44,063)~~(42,760)
Total operating lease liabilities	$	~~124,318~~119,117

Unfunded Capital Commitments

As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, the Company, generally in its capacity as general partner or managing member of the StepStone Funds, had unfunded commitments totaling ~~$87.0~~$98.2 million and ~~$68.2~~$88.7 million, respectively. The ~~$87.0~~$98.2 million and ~~$68.2~~$88.7 million of unfunded commitments as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, respectively, exclude ~~$51.7~~$48.8 million and ~~$40.5~~$50.6 million, respectively, related to commitments held by ~~the legacy Greenspring~~ general partner entities ~~in legacy Greenspring~~for certain funds ~~for~~in which the Company does not hold any direct economic ~~interests.~~interests, including the legacy Greenspring funds.

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StepStone Group Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share amounts and where noted)

Carried Interest Allocations

Carried interest allocations are subject to reversal in the event of future losses, to the extent of the cumulative revenues recognized by the Company in income to date. Additionally, if the Company has received net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company may be obligated to repay previously distributed carried interest that exceeds the amounts to which the Company is ultimately entitled. In these situations, a liability is accrued for the potential clawback obligation if amounts previously distributed to the Company would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, no material amounts for potential clawback obligations had been accrued. This contingent obligation is normally reduced by income taxes that the Company has paid related to the carried interest allocations. As of ~~December 31, 2022,~~September 30, 2023, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) attributable to the Company subject to contingent repayment was an estimated ~~$260.7~~$271.9 million, net of tax, assuming the fair value of all investments was zero, a possibility that the Company views as remote.

Indemnification Arrangements

In the normal course of business and consistent with standard business practices, the Company has provided general indemnifications to its limited partners, officers and directors when they act in good faith in the performance of their duties for the Company. The terms of these indemnities vary from contract to contract. The Company’s maximum exposure under these arrangements cannot be determined as these indemnities relate to future claims that may be made against the Company or related parties, but which have not yet occurred. No liability related to these indemnities has been recorded in the condensed consolidated balance sheets as of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022.~~2023. Based on past experience, management believes that the risk of loss related to these indemnities is remote.

~~16.~~15. Subsequent Events

On ~~February 9,~~November 6, 2023, the Company announced a quarterly cash dividend of ~~$0.20~~$0.21 per share of Class A common stock, payable on ~~March~~December 15, 2023 to holders of record as of the close of business on ~~February 28,~~November 30, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes included within this quarterly report on Form 10-Q and our audited financial statements, the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the fiscal year ended March 31, ~~2022~~2023 filed with the SEC. In this quarterly report, references to “we,” “us,” “our,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership.

Business Overview

We are a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to our clients. Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. We partner with our clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of ~~December 31, 2022,~~September 30, 2023, we were responsible for approximately ~~$602~~$659 billion of total capital, including ~~$134~~$146 billion of AUM and ~~$468~~$513 billion of AUA.

We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 2527 cities across 1516 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships. Since our inception in 2007, we have invested and continue to invest heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities. As of ~~December 31, 2022,~~September 30, 2023, we had ~~920~~1,001 total employees, including ~~312~~341 investment professionals and ~~608~~660 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.

We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies. Our solutions are typically offered in the following commercial structures:

•Separately managed accounts (“SMAs”). Owned by one client and managed according to their specific preferences, SMAs integrate a combination of primaries, secondaries and co-investments across one or more asset classes. SMAs are meant to address clients’ specific portfolio objectives with respect to return, risk tolerance, diversification and liquidity. SMAs, including directly managed assets, comprised ~~$78~~$85 billion of our AUM as of ~~December 31, 2022~~September 30, 2023.

•Focused commingled funds. Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised ~~$43~~$46 billion of our AUM as of ~~December 31, 2022~~September 30, 2023.

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•Advisory, data and administrative services. These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; (v) licensed access to our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”) Research and our other proprietary tools, and (vi) administrative services to unaffiliated investment advisors. Advisory relationships comprised $~~468~~513 billion of our AUA and ~~$13~~$14 billion of our AUM as of ~~December 31, 2022~~September 30, 2023.

•Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities. Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, ~~Omni. Omni~~SPI Reporting. SPI Reporting tracked detailed information on over ~~$885~~$985 billion of client commitments as of ~~December 31, 2022~~September 30, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.

We generate revenues from management and advisory fees and performance fees earned pursuant to contractual arrangements with our funds and our clients. We also invest our own capital in the StepStone Funds we manage to align our interests with those of our clients. Through these investments, we earn a pro-rata share of the results of such funds and may also be entitled to an allocation of performance-based fees from the limited partners in the StepStone Funds, commonly referred to as carried interest.

Trends Affecting Our Business

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings and the ability to source attractive investments and completely utilize the capital that we have raised. However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles. Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.

In addition to these macroeconomic trends and market factors, we believe our future performance will be influenced by the following factors:

•The extent to which clients favor private markets investments. Our ability to attract new capital is partially dependent on clients’ views of private markets relative to traditional asset classes. We believe our fundraising efforts will continue to be subject to certain fundamental asset management trends, including (1) the increasing importance and market share of private markets investment strategies to clients of all types as clients focus on lower-correlated and absolute levels of return, (2) the increasing demand for private markets investments from private wealth clients, (3) shifting asset allocation policies of institutional clients and (4) increasing barriers to entry and growth for potential competitors.

•Our ability to generate strong, stable returns. Our ability to raise and retain capital is partially dependent on the investment returns we are able to generate for our clients and drives growth in our fee-earning AUM (“FEAUM”) and management fees. Although our FEAUM and management fees have grown significantly since our inception, adverse market conditions or an outflow of capital in the private markets management industry in general could affect our future growth rate. In addition, market dislocations, contractions or volatility could put pressure on our returns in the future which could in turn affect our fundraising abilities.

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•Our ability to maintain our data advantage relative to competitors. Our proprietary data and technology platforms, analytical tools and deep industry knowledge allow us to provide our clients with customized investment solutions, including asset management services and tailored reporting packages, such as customized performance benchmarks as well as compliance, administration and tax capabilities. Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information and our ability to grow our relationships with fund managers and clients of all types.

•Our ability to source investments with attractive risk-adjusted returns. The continued growth in our revenues is dependent on our ability to identify attractive investments and deploy the capital that we have raised. However, the capital deployed in any one quarter may vary significantly from period to period due to the availability of attractive opportunities and the long-term nature of our investment strategies. Our ability to identify attractive investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and the liquidity of an investment opportunity. A significant decrease in the quality or quantity of potential opportunities could significantly and adversely affect our ability to source investments with attractive risk-adjusted returns.

•Increased competition and clients’ desire to work with fewer managers. There has been an increasing desire on the part of larger institutional investors to build deeper relationships with fewer private markets managers. At times, this has led to certain funds being oversubscribed due to the increasing flow of capital. Our ability to invest and maintain our relationships with high-performing fund managers across private markets asset classes is critical to our clients’ success and our ability to maintain our competitive position and grow our revenue.

Current Events

We are continuing to closely monitor developments related to ~~COVID-19,~~ inflation, rising interest rates, the ongoing Russia-Ukraine conflict, banking system volatility and the ~~Russia-Ukraine~~Israel-Hamas conflict, and to assess the impact on financial markets and on our business. Our ~~future~~ results and the overall industry results have been and may continue to be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which ~~could~~have resulted in, and may continue to result in, delayed or decreased management fees. Further, if fund managers ~~are~~have been unable or less able to ~~profitably~~ exit existing investments ~~such~~profitably. Such conditions ~~could~~have resulted in, and may continue to result in, delayed or decreased performance fee revenues. It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and our condensed consolidated financial statements. ~~For a description on the impact of these and other factors, see~~See “Risk Factors—Risks Related to Our Industry—Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, or causing our ~~SMA~~ clients to reduce their investments in private ~~markets”~~markets, reducing the number of high-quality investment managers with whom we may invest, and ~~“—The COVID-19 pandemic has severely disrupted~~reducing the ~~global financial markets~~ability of our funds to raise or deploy capital” and ~~business climate and~~“Risk Factors—Banking system volatility may adversely affect ~~our business,~~the results and financial condition ~~and results~~ of ~~operations”~~the StepStone Funds or StepStone generally” included in our annual report on Form 10-K for the fiscal year ended March 31, ~~2022.~~2023.

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~~Recent~~Corporate Transactions

Private Wealth Transaction

In November 2022, we entered into new arrangements with the StepStone Group Private Wealth LLC (“SPW”) management team, which are intended to update the legacy SPW compensation structure to better incentivize the SPW team to grow the platform, while ensuring the platform will remain part of StepStone going forward (the “Private Wealth Transaction”). SPW ~~which was formerly known as Conversus,~~ is the platform established by us to expand access to the private markets for ~~high-net-worth and~~ accredited investors. At the establishment of the platform, the SPW management team were provided an ability to acquire the platform from us in exchange for an amount which would have provided us a return of our initial investment plus an equity return.

As part of the new arrangements, certain members of the SPW team received a profits interest in SPW and concurrently entered into an option agreement which provides that, (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027, in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC, ~~(formerly known as Conversus Holdings LLC),~~ has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless we elect to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of our Class A common stock, and, in either case, rights under one or more tax receivable agreements. ~~See the Option Agreement, which is filed as an exhibit to this quarterly report on Form 10-Q, for additional information.~~

Equity Transactions

In ~~June 2022,~~September 2023, we issued ~~257,776~~105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for ~~257,776~~105,598 Class B units in accordance with elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

~~In September 2022,~~ On the same date, we also issued ~~175,000~~551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for 175,000 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

In December 2022, we issued 296,756 shares of Class A common stock to certain limited partners of the Partnership in exchange for 296,756 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We also issued 414,739 shares of Class A common stock to certain limited partners of the Partnership in exchange for 414,739551,954 Class C units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions.

~~Greenspring Acquisition~~

On September 20, 2021, we completed the acquisition of 100% of the equity of Greenspring in exchange for (i) cash consideration of approximately $185 million, net of an agreed upon adjustment based upon Greenspring’s net working capital balance at the closing date, (ii) 12,686,756 shares A corresponding number of Class A ~~common stock and (iii) 3,071,519 newly issued Class C~~ units of the Partnership ~~in each case subject~~were issued to certain adjustments (including customary adjustments for cash, debt, debt-like items, transaction expenses and net working capital at closing). The transaction agreement also provides for the payment of an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. The results of Greenspring’s operations have been included in the condensed consolidated financial statements effective September 20, 2021.us.

Organizational Structure

SSG is a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner. In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs. Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units and Class C units held by partners of the Partnership in our consolidated financial statements.

Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement and Class C Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units and Class C units of the Partnership, respectively, each Class B unit or Class C unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement. When a Class B unit or Class C unit is surrendered for exchange, it will not be available for reissuance. When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled. There are no corresponding shares of common stock for the Class C units.

The diagram below illustrates our organizational structure as of ~~December 31, 2022.~~September 30, 2023.

Amounts may not sum to ~~total~~100% due to rounding.

(1)The partners of the Partnership other than StepStone Group Inc. are:

•the General Partner, which holds a 100% general partner interest and no economic interests;

•certain members of management, employee owners and outside investors, all of whom own Class B units and an equivalent number of shares of Class B common stock;

•certain members of management and employees who own Class B2 units; and

•certain employee owners who own Class C units.

(2)Each share of Class A common stock is entitled to one vote and vote together with the Class B common stock as a single class, except as set forth in SSG’s amended and restated certificate of incorporation or as required by law.

(3)Each share of Class B common stock is entitled to five votes prior to a Sunset (as defined below). After a Sunset becomes effective, each share of our Class B common stock will then entitle its holder to one vote. The economic rights of our Class B common stock are limited to the right to be redeemed at par value.

A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025. As of ~~December 31, 2022~~September 30, 2023 the Sunset Holders collectively maintained direct or indirect beneficial ownership of approximately ~~31.1~~30.8% of the Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock) and approximately ~~56.3%~~56.1% of the aggregate voting power of our outstanding Class A common stock and Class B common stock.

Key Financial Measures

Our key financial measures are discussed below. Additional information regarding our significant accounting policies can be found in note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report.

Revenues

We generate revenues primarily from management and advisory fees, incentive fees and allocations of carried interest.

Management and Advisory Fees, Net

Management and advisory fees, net, consist of fees received from managing SMAs and focused commingled funds, advisory, data and administrative services, and portfolio analytics and reporting.

•Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital. These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances. The weighted-average management fee rate from SMAs was approximately ~~0.41%~~0.40% and 0.40% of average FEAUM for the twelve months ended ~~December 31, 2021~~September 30, 2022 and ~~2022, respectively, and primarily reflected shifts in asset class mix.~~2023, respectively.

•Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period. Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment. The weighted-average management fee rate from focused commingled funds was approximately ~~0.84%~~0.85% and ~~0.80%~~0.88% of average FEAUM for the twelve months ended ~~December 31, 2021~~September 30, 2022 and ~~2022,~~2023, respectively, and primarily reflected the timing of new funds, and shifts in asset class ~~mix and the impact of the Greenspring acquisition.~~mix.

•The weighted-average management fee rate across SMAs and focused commingled funds was approximately ~~0.52%~~0.55% and ~~0.54%~~0.57% of average FEAUM for the twelve months ended ~~December 31, 2021~~September 30, 2022 and ~~2022,~~2023, respectively, and primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.

•Fee revenues from advisory, StepStone Portfolio Analytics & Reporting (“SPAR”), SPI Research or administrative services are generally annual fixed fees, which vary based on the scope of services we provide. We also provide certain project-based or event-driven advisory services. The fees for these services are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service. Because advisory fees are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service, advisory fees do not necessarily correlate with the total size of our AUA.

•Management fees are reflected net of (i) certain professional and administrative services that we arrange to be performed by third parties on behalf of investment funds and (ii) certain distribution and servicing fees paid to third-party financial institutions. In both situations, we are acting as an agent because we do not control the services provided by the third parties before they are transferred to the customer.

Performance Fees

We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below. As of ~~December 31, 2022,~~September 30, 2023, we had over ~~$60~~$67 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across approximately ~~175~~195 programs.

Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund. Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks. Incentive fees are a form of variable consideration and represent contractual fee arrangements in our contracts with our customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period. Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.

We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization). However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt. Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets.

Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from limited partners in the StepStone Funds in which we hold an equity interest. We are entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in the respective fund’s governing documents. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers.

Legacy Greenspring carried interest allocations include the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest. The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. We account for the ~~investments and~~investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of ~~accounting.~~accountingbecause we are presumed to have significant influence as the general partner or managing member. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606. We do not have any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from ~~certain~~the legacy Greenspring funds. All of the carried interest allocations in respect of such legacy Greenspring funds are payable to employees who are considered affiliates of the Company. As a result, carried interest allocations in respect of such legacy Greenspring funds have been reflected as legacy Greenspring carried interest allocations in the condensed consolidated statements of income, with a corresponding amountto us and are therefore reflected as legacy Greenspring performance fee-related compensation ~~as these amounts are payable to certain employees. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within~~in the ~~scope~~consolidated statements of ~~ASC 606.~~income.

We recognize revenue attributable to carried interest allocations from a StepStone Fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. Accordingly, the amount recognized as carried interest allocation revenue reflects our share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period. We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations, which is included as a component of investments in the condensed consolidated balance sheets. Our determination of fair value for investments in the underlying funds includes various valuation techniques. These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted-average cost of capital, exit multiples, or terminal growth rates.

Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is subject to reversal to the extent that the amount received to date exceeds the amount due to us based on cumulative results. As such, a liability is accrued for the potential clawback obligations if amounts previously distributed to us would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of ~~December 31, 2022~~September 30, 2023 and March 31, ~~2022,~~2023, no material amounts for potential clawback obligations had been accrued.

Expenses

Cash-based compensation primarily includes salaries, bonuses, employee benefits and employer-related payroll taxes.

Equity-based compensation represents grants of equity related awards or arrangements to certain employees and directors.

Performance fee-related compensation represents the portion of carried interest allocation revenue and

incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the condensed consolidated balance sheets. Carried interest-related compensation expense also

includes the portion of net carried interest allocation revenue attributable to equity holders of our consolidated subsidiaries that are not 100% owned by us. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made.

Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations which are entirely payable to certain employees. Legacy Greenspring carried interest-related compensation is accounted for as compensation expense in conjunction with the related legacy Greenspring carried interest allocation revenue and, until paid, is recorded as a component of legacy Greenspring accrued carried interest-related compensation in the condensed consolidated balance sheets. Legacy Greenspring carried interest-related compensation expense may be subject to reversal to the extent that the related legacy Greenspring carried interest allocation revenue is reversed. However, none of the legacy Greenspring carried interest allocation revenue is attributable to the Company.

General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business. Beginning in the quarter ended December 31, 2022, general, administrative and other includes costs associated with the Consolidated Funds. Expenses of the Consolidated Funds have no impact on net income or loss attributable to ~~the Company~~us to the extent such expenses are borne by third-party investors.

Other Income (Expense)

Investment income (loss) primarily represents our share of earnings (losses) from the investments we make in our SMAs and focused commingled funds. We, either directly or through our subsidiaries, generally have a general partner interest in the StepStone Funds, which invest in primary funds, secondary funds and co-investment funds, or a combination thereof. Investment income will increase or decrease based on the earnings of the StepStone Funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds. Our co-investment funds invest in underlying portfolio companies and therefore their valuation changes from period to period are more influenced by individual companies than our primary and secondary funds, which have exposures across multiple portfolio companies in underlying private markets funds. Our SMAs and focused commingled funds invest across various industries, strategies and geographies.

Consequently, our general partner investments do not include any significant concentrations in a specific sector or geography outside the United States. Investment income and legacy Greenspring investment income exclude carried interest allocations, which are presented as revenues as described above.

Legacy Greenspring investment income (loss) represents our share of earnings (losses) from the investments we make in certain legacy Greenspring funds through the legacy Greenspring general partner entities. We have no direct economic interests in the legacy Greenspring general partner entities. As a result, all such income is reflected as non-controlling interests in legacy Greenspring entities. Legacy Greenspring investment income will increase or decrease based on the earnings of such legacy Greenspring funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds.

Investment income (loss) of Consolidated Funds represents gains (losses) from the investments held by the Consolidated Funds.

Interest income consists of income earned on cash and cash equivalents, and restricted ~~cash~~cash. The three and ~~certificates of deposit.~~six months ended September 30, 2023 include amounts associated with the Consolidated Funds.

Interest expense primarily consists of the interest expense on the Revolver, as well as the related amortization of deferred financing costs.

Other income (loss) includes foreign currency transaction gains and losses and non-operating activities. The three and six months ended September 30, 2023 include amounts associated with the Consolidated Funds

Income Tax Expense

We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by the Partnership. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including us, and is generally not subject to U.S. federal or state income tax at the Partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to local or non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity ~~level. Accordingly, the~~level which are reflected within income tax ~~liability with respect to income attributable to non-controlling interests~~expense in the condensed consolidated statements of income. As a result, the Partnership ~~is borne~~does not record U.S. federal and state income taxes on income generated by the ~~holders of such non-controlling interests.~~Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.

Non-Controlling Interests

Non-controlling interests ~~(“NCI”)~~ reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. Non-controlling interests are presented as separate components in our condensed consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities. Net income (loss) attributable to SSG, as reported in the condensed consolidated statements of income, is presented net of the portion of net income (loss) attributable to holders of non-controlling interests.

Non-controlling interests in subsidiaries represent the economic interests in the consolidated subsidiaries of the Partnership held by third parties and employees in those entities. Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income (loss) related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.

Redeemable non-controlling interests in Consolidated Funds represent the economic interests in the Consolidated Funds which are not held by us, but are held by the third-party investors in the funds. Redeemable non-controlling interests in Consolidated Funds are allocated a share of income or loss in the respective fund in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B and Class C unitholders of the Partnership. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Key Operating Metrics

We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business.

Assets Under Management

AUM primarily reflects the assets associated with our SMAs and focused commingled funds. We classify assets as AUM if we have full discretion over the investment decisions in an account or have responsibility or custody of assets. Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.

Our AUM is calculated as the sum of (i) the net asset value (“NAV”) of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds. Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUM does not include post-period investment valuation or cash activity. AUM as of ~~December 31, 2022~~September 30, 2023 reflects final data for the prior period ~~(September~~(June 30, ~~2022)~~2023), adjusted for net new client account activity through ~~December 31, 2022.~~September 30, 2023. NAV data for underlying investments is as of ~~September~~June 30, ~~2022,~~2023, as reported by underlying managers up to the business day occurring on or after 100 days following ~~September~~June 30, ~~2022.~~2023. When NAV data is not available by the business day occurring on or after 100 days following ~~September~~June 30, ~~2022,~~2023, such NAVs are adjusted for cash activity following the last available reported NAV.

Assets Under Advisement

AUA consists of client assets for which we do not have full discretion to make investment decisions but play a role in advising the client or monitoring their investments. We generally earn revenue for advisory-related services on a contractual fixed fee basis. Advisory-related services include asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, legal negotiations, monitoring and reporting on investments, and investment manager review and due diligence. Advisory fees vary by client based on the scope of services, investment activity and other factors. Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue.

We believe AUA is a useful metric for assessing the relative size of our advisory business.

Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments. Our AUA reflects the investment valuations in respect of the underlying investments of our client accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUA does not include post-period investment valuation or cash activity. AUA as of ~~December 31, 2022~~September 30, 2023 reflects final data for the prior period ~~(September~~(June 30, ~~2022)~~2023), adjusted for net new client account activity through ~~December 31, 2022.~~September 30, 2023. NAV data for underlying investments is as of ~~September~~June 30, ~~2022,~~2023, as reported by underlying managers up to the business day occurring on or after 100 days following ~~September~~June 30, ~~2022.~~2023. When NAV data is not available by the business day occurring on or after 100 days following ~~September~~June 30, ~~2022,~~2023, such NAVs are adjusted for cash activity following the last available reported NAV.

Fee-Earning AUM

FEAUM reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are paid fees as the manager of the assets. Our SMAs and focused commingled funds typically pay management fees based on capital commitments, net invested capital and, in certain cases, NAV, depending on the fee terms. Management fees are only marginally affected by market appreciation or depreciation because substantially all of the StepStone Funds pay management fees based on capital commitments or net invested capital. As a result, management fees and FEAUM are not materially affected by changes in market value. We believe FEAUM is a useful metric in order to assess assets forming the basis of our management fee revenue.

Our calculation of FEAUM may differ from the calculations of other asset managers and, as a result, may not be comparable to similar measures presented by other asset managers.

Undeployed Fee-Earning Capital

Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or activated.

~~Non-GAAP Financial Measures~~

~~Below~~ We believe undeployed fee-earning capital is a ~~description~~useful metric for measuring the amount of our non-GAAP financial measures. These measures are presented on a basis other than GAAP and should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

~~Adjusted Revenues and Adjusted Net Income~~

~~Adjusted net income (“ANI”) is a non-GAAP performance measure~~capital that we ~~present on a pre-tax and after-tax basis used~~can put to ~~evaluate profitability. ANI represents the after-tax net realized income attributable to us. The components of revenues used~~work in the ~~determination of ANI (“adjusted revenues”) comprise net~~future and thus earn management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income, (c) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (d) amortization of intangibles and (e) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income as none of the economics are attributable to us. ANI is income before taxes fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

~~Fee-Related Earnings~~

Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises net management and advisory fees, less operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (c) amortization of intangibles, and (d) other non-core operating items. FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee ~~revenues.~~

~~Adjusted Net Income Per Share~~

ANI per share measures our per-share earnings assuming all Class B units and Class C units in the Partnership are exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted shares outstanding. We believe ANI per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.

revenue thereon.

Consolidation of StepStone Funds

~~Beginning in the quarter ended December 31, 2022, we consolidated one investment fund for which we are deemed to have a controlling financial interest.~~

The activity of the Consolidated Funds is reflected within the condensed consolidated financial statement line items as indicated by reference thereto. The impact of the Consolidated Funds decrease revenues reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us. The net economic ownership interests of our Consolidated Funds held by third parties are reflected as redeemable non-controlling interests in Consolidated Funds in our condensed consolidated financial statements. We generally deconsolidate funds when we are no longer deemed to have a controlling financial interest in the entity. The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds.

Consolidated Results of Operations

We consolidate funds and entities where we are deemed to hold a controlling financial interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' or investor rights, and the creation and termination of funds and entities. There were no Consolidated Funds consolidated for the three and six months ended September 30, 2022. The following is a discussion of our unaudited consolidated results of operations for the periods presented. The information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

Three Months Ended December 31, Nine Months Ended December 31,
(in thousands) 2022 2021 2022 2021
Revenues
Management and advisory fees, net $ 128,753 $ 106,384 $ 364,606 $ 268,028
Performance fees:
Incentive fees 2,980 27 8,345 6,005
Carried interest allocations:
Realized 16,320 66,559 112,396 169,053
Unrealized (63,367) 132,535 (354,095) 452,789
Total carried interest allocations (47,047) 199,094 (241,699) 621,842
Legacy Greenspring carried interest allocations(1)
(88,921) 104,960 (371,200) 104,960
Total revenues (4,235) 410,465 (239,948) 1,000,835
Expenses
Compensation and benefits:
Cash-based compensation 62,628 51,665 182,190 138,217
Equity-based compensation 8,108 3,407 15,605 10,363
Performance fee-related compensation:
Realized 11,726 34,033 67,091 86,122
Unrealized (31,875) 68,368 (172,554) 228,146
Total performance fee-related compensation (20,149) 102,401 (105,463) 314,268
Legacy Greenspring performance fee-related compensation(1)
(88,921) 104,960 (371,200) 104,960
Total compensation and benefits (38,334) 262,433 (278,868) 567,808
General, administrative and other 43,582 30,299 111,547 72,049
Total expenses 5,248 292,732 (167,321) 639,857
Other income (expense)
Investment income (loss) (681) 7,230 (5,473) 20,841
Legacy Greenspring investment income (loss)(1)
(8,966) 17,890 (32,927) 17,890
Investment income of Consolidated Funds 4,895 — 4,895 —
Interest income 701 43 1,068 329
Interest expense (1,111) (543) (2,515) (637)
Other income (loss) 358 (273) (1,380) (2,662)
Total other income (expense) (4,804) 24,347 (36,332) 35,761
Income (loss) before income tax (14,287) 142,080 (108,959) 396,739
Income tax expense (benefit) (732) 15,787 (6,868) 16,065
Net income (loss) (13,555) 126,293 (102,091) 380,674
Less: Net income attributable to non-controlling interests in subsidiaries 9,575 7,091 25,836 18,737
Less: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities(1)
(8,966) 17,890 (32,927) 17,890
Less: Net income (loss) attributable to non-controlling interests in the Partnership (7,617) 52,966 (48,192) 191,977
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 391 — 391 —
Net income (loss) attributable to StepStone Group Inc. $ (6,938) $ 48,346 $ (47,199) $ 152,070


	Three Months Ended September 30,				Six Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Revenues
Management and advisory fees, net	$	142,123	$	119,121	$	280,238	$	235,853
Performance fees:
Incentive fees	4,946		5,365		4,952		5,365
Carried interest allocations:
Realized	1,585		22,469		16,058		96,076
Unrealized	55,371		(176,778)		104,735		(290,728)
Total carried interest allocations	56,956		(154,309)		120,793		(194,652)
Legacy Greenspring carried interest allocations(1)	(12,603)		(128,672)		(36,550)		(282,279)
Total performance fees	49,299		(277,616)		89,195		(471,566)
Total revenues	191,422		(158,495)		369,433		(235,713)
Expenses
Compensation and benefits:
Cash-based compensation	74,851		59,501		144,932		119,562
Equity-based compensation	5,916		3,783		14,388		7,497
Performance fee-related compensation:
Realized	1,720		13,630		10,822		55,365
Unrealized	28,712		(86,126)		52,923		(140,679)
Total performance fee-related compensation	30,432		(72,496)		63,745		(85,314)
Legacy Greenspring performance fee-related compensation(1)	(12,603)		(128,672)		(36,550)		(282,279)
Total compensation and benefits	98,596		(137,884)		186,515		(240,534)
General, administrative and other	31,729		33,733		65,006		67,965

Total expenses	130,325		(104,151)		251,521		(172,569)
Other income (expense)
Investment income (loss)	3,080		(3,691)		6,166		(4,792)
Legacy Greenspring investment loss(1)	(3,966)		(15,357)		(6,832)		(23,961)
Investment income of Consolidated Funds	8,772		—		11,134		—
Interest income	977		356		1,408		367
Interest expense	(2,108)		(817)		(4,120)		(1,404)
Other loss	(872)		(634)		(645)		(1,738)
Total other income (expense)	5,883		(20,143)		7,111		(31,528)
Income (loss) before income tax	66,980		(74,487)		125,023		(94,672)
Income tax expense (benefit)	7,729		(7,422)		16,326		(6,136)
Net income (loss)	59,251		(67,065)		108,697		(88,536)
Less: Net income attributable to non-controlling interests in subsidiaries	9,615		8,690		19,245		16,261
Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1)	(3,966)		(15,357)		(6,832)		(23,961)
Less: Net income (loss) attributable to non-controlling interests in the Partnership	22,928		(31,177)		42,788		(40,575)
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds	4,449		—		6,002		—
Net income (loss) attributable to StepStone Group Inc.	$	26,225	$	(29,221)	$	47,494	$	(40,261)

_______________________________

(1)Reflects amounts attributable to consolidated VIEs for which we did not acquire any direct economic interests. See notes 3 5 and 145 to our condensed consolidated financial statements included elsewhere in this quarterly report.

6155

Revenues

Three Months Ended ~~December 31, 2022~~September 30, 2023 Compared to Three Months Ended ~~December 31, 2021~~September 30, 2022

Total revenues ~~decreased $414.7~~increased $349.9 million to ~~$(4.2)~~$191.4 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021, due to negative~~September 30, 2022. The overall increase was driven by positive carried interest allocations ~~and~~in the current period as compared to a reversal of carried interest allocations in the prior year period, a lower reversal of legacy Greenspring carried interest allocations in the current period as compared to ~~positive carried interest allocations and legacy Greenspring carried interest allocations in~~ the prior year period, ~~partially offset by higher~~and an increase in net management and advisory fees, ~~and~~partially offset by a decrease in incentive ~~fees.~~fees in each case, as described below.

Net management and advisory fees increased ~~$22.4~~$23.0 million, or ~~21%~~19%, to ~~$128.8~~$142.1 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The increase was driven by new client activity and ~~18%~~10% growth in average FEAUM across the platform. The three months ended ~~December 31, 2021~~September 30, 2023 included retroactive fees of ~~$1.2~~$3.7 million from the ~~final closing of StepStone Tactical Growth Fund III (“STGF III”) and additional~~ closings of ~~StepStone Capital Partners V (“SCP V”). For new investors, fees relating to periods prior to the closing date are considered retroactive.~~StepStone’s private equity secondaries and multi-strategy global venture capital funds.

Incentive fees ~~increased $3.0~~decreased $0.4 million, or 8%, to ~~$3.0~~$4.9 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to ~~$27 thousand for~~ the three months ended ~~December 31, 2021, reflecting higher~~September 30, 2022 due to lower realization activity.

Realized carried interest allocation revenues decreased ~~$50.2~~$20.9 million, or ~~75%~~93%, to ~~$16.3~~$1.6 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, reflecting lower realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of ~~$16.3~~$1.6 million, unrealized carried interest allocation revenues ~~decreased $246.1~~increased $211.3 million to ~~$(47.0)~~$57.0 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The ~~decrease~~increase in unrealized carried interest allocations for the three months ended ~~December 31, 2022~~September 30, 2023 primarily reflected a net ~~decrease~~increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Legacy Greenspring carried interest allocation revenues ~~decreased $193.9~~increased $116.1 million, or 90%, to ~~$(88.9)~~$(12.6) million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022 as a result of lower net unrealized depreciation in the fair value of certain underlying fund investments in the current year period as compared to the prior year period. The three months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized carried interest allocations of ~~$5.2~~$25.0 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of ~~$(94.1)~~$(37.6) million. The three months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized carried interest allocations of ~~$24.6~~$10.6 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of ~~$80.4~~$(139.2) million.

~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 Compared to ~~Nine~~Six Months Ended ~~December 31, 2021~~September 30, 2022

Total revenues ~~decreased $1,240.8~~increased $605.1 million to ~~$(239.9)~~$369.4 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021, due to negative~~September 30, 2022. The overall increase was driven by positive carried interest allocations ~~and~~in the current period as compared to a reversal of carried interest allocations in the prior year period, a lower reversal of legacy Greenspring carried interest allocations in the current period as compared to ~~positive carried interest allocations and legacy Greenspring carried interest allocations in~~ the prior year period, ~~partially offset by higher~~and an increase in net management and advisory fees, ~~and~~partially offset by a decrease in incentive ~~fees.~~fees in each case, as described below.

Net management and advisory fees increased ~~$96.6~~$44.4 million, or ~~36%~~19%, to ~~$364.6~~$280.2 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The increase was driven by new client activity and ~~32%~~12% growth in average FEAUM ~~(or 23% excluding the impact of Greenspring)~~ across the ~~platform, as well as~~platform. The six months ended September 30, 2023 included retroactive fees of $5.3 million from the closings of StepStone’s private equity secondaries, multi-strategy global venture capital and infrastructure co-investment funds, and the six months ended September 30, 2022 included retroactive fees of $2.4 million from the final closing of ~~SCP~~StepStone Capital Partners V. The nine months ended December 31, 2021 included retroactive fees of $4.3 million from the final closing of STGF III and additional closings of SCP V. For new investors, fees relating to periods prior to the closing date are considered retroactive.

Incentive fees ~~increased $2.3~~decreased $0.4 million, or ~~39%~~8%, to ~~$8.3~~$5.0 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to ~~$6.0 million for~~ the ~~nine~~six months ended ~~December 31, 2021, reflecting higher~~September 30, 2022 due to lower realization activity.

Realized carried interest allocation revenues decreased ~~$56.7~~$80.0 million, or ~~34%~~83%, to ~~$112.4~~$16.1 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, reflecting lower realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of ~~$112.4~~$16.1 million, unrealized carried interest allocation revenues ~~decreased $863.5~~increased $315.4 million to ~~$(241.7)~~$120.8 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The ~~decrease~~increase in unrealized carried interest allocations for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 primarily reflected a net ~~decrease~~increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Legacy Greenspring carried interest allocation revenues ~~decreased $476.2~~increased $245.7 million, or 87%, to ~~$(371.2)~~$(36.6) million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022 as a result of lower net unrealized depreciation in the fair value of certain underlying fund investments in the current year period as compared to the prior year period. The ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized carried interest allocations of ~~$45.4~~$25.9 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of ~~$(416.6)~~$(62.5) million. The ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized carried interest allocations of ~~$27.6~~$40.1 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of ~~$77.3 million for the period from September 20, 2021 to December 31, 2021.~~$(322.4) million.

Expenses

Three Months Ended ~~December 31, 2022~~September 30, 2023 Compared to Three Months Ended ~~December 31, 2021~~September 30, 2022

Total expenses ~~decreased $287.5~~increased $234.5 million ~~or 98%,~~ to ~~$5.2~~$130.3 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021, due to decreases in performance fee-related compensation and~~September 30, 2022. The increase resulted from a lower reversal of legacy Greenspring performance fee-related compensation and increases in performance fee-related compensation, cash-based compensation and equity-based compensation, partially offset by ~~increases~~a decrease in general, administrative and other expenses ~~cash-based compensation and equity-based compensation.~~in each case, as described below.

Cash-based compensation increased ~~$11.0~~$15.4 million, or ~~21%~~26%, to ~~$62.6~~$74.9 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, due to increased staffing and compensation ~~levels.~~levels and timing of certain bonus accruals. Our average full-time headcount increased ~~21%~~14% in the current year period as compared to the prior year period.

Equity-based compensation increased ~~$4.7~~$2.1 million, or ~~138%~~56%, to ~~$8.1~~$5.9 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The increase was primarily attributable to the inclusion of ~~expense~~expenses related to liability classified awards in the current year period of $1.2 million and no comparable expense in the prior year period, as well as additional grants of RSUs made in February 2023 and no comparable expense in the prior year period.

Performance fee-related compensation expense ~~decreased $122.6~~increased $102.9 million to ~~$(20.1)~~$30.4 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting the ~~decrease~~increase in carried interest allocation revenue. Realized performance fee-related compensation decreased ~~$22.3~~$11.9 million, or ~~66%~~87%, to ~~$11.7~~$1.7 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting lower realization activity.

Legacy Greenspring performance fee-related compensation expense ~~decreased $193.9~~increased $116.1 million, or 90%, to ~~$(88.9)~~$(12.6) million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The three months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized performance fee-related compensation expense of ~~$5.2~~$25.0 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of ~~$(94.1)~~$(37.6) million. The three months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized performance fee-related compensation expense of ~~$24.6~~$10.6 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of ~~$80.4~~$(139.2) million.

General, administrative and other expenses ~~increased $13.3~~decreased $2.0 million, or ~~44%~~6%, to ~~$43.6~~$31.7 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The overall ~~increase~~decrease primarily reflected a decrease of $7.6 million due to a gain on change in fair value for contingent consideration obligation in the current year period as compared to a loss in the prior year period, partially offset by increases of ~~$6.8~~$2.7 million due to a prior year gain within occupancy costs related to lease remeasurement adjustments due to a reduction in lease terms, $1.1 million in ~~transaction~~occupancy costs, ~~$2.8 million of travel and associated costs for investment evaluation and client service, $0.8~~$0.6 million in ~~professional fees, $0.6~~information and technology expenses, $0.4 million in accelerated depreciation for leasehold improvements due to a reduction in lease terms, ~~$0.5~~$0.3 million in ~~information and technology expenses, $0.4 million in loss on change in fair value for contingent consideration obligation~~professional fees and other general operating expenses.

~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 Compared to ~~Nine~~Six Months Ended ~~December 31, 2021~~September 30, 2022

Total expenses ~~decreased $807.2~~increased $424.1 million to ~~$(167.3)~~$251.5 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021, due to decreases in performance fee-related compensation and~~September 30, 2022. The increase resulted from a lower reversal of legacy Greenspring performance fee-related compensation and increases in performance fee-related compensation, cash-based compensation and equity-based compensation, partially offset by ~~increases~~a decrease in ~~cash-based compensation,~~ general, administrative and other expenses ~~and equity-based compensation.~~in each case, as described below.

Cash-based compensation increased ~~$44.0~~$25.4 million, or ~~32%~~21%, to ~~$182.2~~$144.9 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, due to increased staffing and compensation levels. Our average full-time headcount increased ~~32% (or 25% excluding the impact of Greenspring)~~17% in the current year period as compared to the prior year period.

Equity-based compensation increased ~~$5.2~~$6.9 million, or ~~51%~~92%, to ~~$15.6~~$14.4 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The increase was primarily attributable to the inclusion of ~~expense~~expenses related to liability classified awards in the current year period of $5.1 million and no comparable expense in the prior year period, as well as additional grants of RSUs made in February 2023 and no comparable expense in the prior year period.

Performance fee-related compensation expense ~~decreased $419.7~~increased $149.1 million to ~~$(105.5)~~$63.7 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting the ~~decrease~~increase in carried interest allocation revenue. Realized performance fee-related compensation decreased ~~$19.0~~$44.5 million, or ~~22%~~80%, to ~~$67.1~~$10.8 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting lower realization activity. The decrease was partially offset by an increase reflecting realized carried interest allocations recognized in the current year period from certain funds for which a higher portion is paid to employees as realized performance fee-related compensation.

Legacy Greenspring performance fee-related compensation expense ~~decreased $476.2~~increased $245.7 million, or 87%, to ~~$(371.2)~~$(36.6) million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized performance fee-related compensation expense of ~~$45.4~~$25.9 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of ~~$(416.6)~~$(62.5) million. The ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized performance fee-related compensation expense of ~~$27.6~~$40.1 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of ~~$77.3 million for the period from September 20, 2021 to December 31, 2021.~~

$(322.4) million.

General, administrative and other expenses ~~increased $39.5~~decreased $3.0 million, or ~~55%~~4%, to ~~$111.5~~$65.0 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The overall ~~increase~~decrease primarily reflected ~~increases~~decreases of ~~$19.2~~$12.1 million ~~in amortization expense for intangibles, $8.4 million of travel and associated costs for investment evaluation and client service, $8.3 million in loss~~due to a gain on change in fair value for contingent consideration obligation ~~$3.4~~as compared to a loss in the prior year period and $1.2 million in ~~professional fees, $3.2~~recruiting costs, partially offset by increases of $2.7 million due to a prior year gain within occupancy costs related to lease remeasurement adjustments due to a reduction in lease terms, $1.8 million in occupancy costs, $1.3 million in information and technology expenses, ~~$0.8~~$1.3 million in professional fees, $1.1 million in accelerated depreciation for leasehold improvements due to a reduction in lease terms, $1.0 million of travel and associated costs for investment evaluation and client service and other general operating expenses, partially offset by a decrease in transaction costs of $7.0 million and a gain of $2.7 million within occupancy costs related to lease remeasurement adjustments due to a reduction in lease terms.expenses.

Other Income (Expense)

Three Months Ended ~~December 31, 2022~~September 30, 2023 Compared to Three Months Ended ~~December 31, 2021~~September 30, 2022

Investment income ~~decreased $7.9~~(loss) increased $6.8 million to ~~a loss~~income of ~~$0.7~~$3.1 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment ~~income~~loss decreased ~~$26.9~~$11.4 million, or 74%, to ~~a loss of $9.0~~$4.0 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The three months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized investment income of ~~$0.7~~$3.9 million and unrealized investment loss, net of the reversal of realized investment income, of ~~$9.7~~$7.9 million. The three months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized investment income of ~~$3.6~~$1.8 million and unrealized investment ~~income,~~loss, net of the reversal of realized investment ~~loss,~~income, of ~~$14.3~~$17.1 million.

Investment income of Consolidated Funds of ~~$4.9~~$8.8 million for the three months ended ~~December 31, 2022~~September 30, 2023 reflects overall changes in the valuations of the underlying investments of the Consolidated Funds.

Interest income increased ~~$0.7~~$0.6 million, or ~~1,530%~~174%, to ~~$0.7~~$1.0 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022, primarily due to higher average interest rates earned on cash and cash equivalent balances. Interest income attributable to Consolidated Funds was $0.2 million in the current year period as compared to zero in the prior year period.

Interest expense increased ~~$0.6~~$1.3 million, or ~~105%~~158%, to ~~$1.1~~$2.1 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021.~~September 30, 2022. The increase was due to higher average interest rates and higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.

Other loss ~~decreased $0.6~~increased $0.2 million, or 38%, to ~~income of $0.4~~$0.9 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting higher net foreign currency transaction ~~gains~~losses in the current year period as compared with ~~net foreign currency transaction losses in~~ the prior year period.

~~Nine~~

Six Months Ended ~~December 31, 2022~~September 30, 2023 Compared to ~~Nine~~Six Months Ended ~~December 31, 2021~~September 30, 2022

Investment income ~~decreased $26.3~~(loss) increased $11.0 million to ~~a loss~~income of ~~$5.5~~$6.2 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment ~~income~~loss decreased ~~$50.8~~$17.1 million, or 71%, to ~~a loss of $32.9~~$6.8 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 reflect gross realized investment income of $4.1 million and unrealized investment loss, net of the reversal of realized investment income, of ~~$37.0~~$11.0 million. The ~~nine~~six months ended ~~December 31, 2021~~September 30, 2022 reflect gross realized investment income of ~~$4.9~~$3.4 million and unrealized investment ~~income,~~loss, net of the reversal of realized investment ~~loss,~~income, of ~~$13.0 million for the period from September 20, 2021 to December 31, 2021.~~

$27.3 million.

Investment income of Consolidated Funds of ~~$4.9~~$11.1 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 reflects overall changes in the valuations of the underlying investments of the Consolidated Funds.

Interest income increased ~~$0.7~~$1.0 million, or ~~225%~~284%, to ~~$1.1~~$1.4 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022, primarily due to higher average interest rates earned on cash and cash equivalent balances. Interest income attributable to Consolidated Funds was $0.5 million in the current year period as compared to zero in the prior year period.

Interest expense increased ~~$1.9~~$2.7 million, or ~~295%~~193%, to ~~$2.5~~$4.1 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The increase was ~~primarily~~ due to ~~a full period of interest and~~ higher average interest rates onand higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.

Other loss decreased ~~$1.3~~$1.1 million, or ~~48%~~63%, to ~~$1.4~~$0.6 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting ~~the inclusion of losses related to adjustments for the Tax Receivable Agreements in the prior year period and no comparable~~lower net foreign currency transaction losses in the current year period as compared with the prior year period.

Income Tax Expense

Income tax expense primarily reflects U.S. federal and state income taxes on our share of taxable income generated by the Partnership, as well as local and foreign income taxes of certain of the Partnership’s subsidiaries.

Our effective income tax rate was ~~5.1%~~11.5% and ~~11.1%~~10.0% for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~6.3%~~13.1% and ~~4.0%~~6.5% for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. Our overall effective tax rate in each of the periods described above is less than the statutory ~~rate. The primary~~ rate ~~difference for the three and nine months ended December 31, 2022 and 2021 relates to~~as a portion of income ~~that is~~was allocated to non-controlling interests asand the tax liability on such income is borne by the holders of ~~such~~ non-controlling interests. ~~Additionally, during~~The primary rate difference was due to an increase in foreign tax expense for the ~~nine~~three and six months ended ~~December 31, 2021, we~~September 30, 2023.Additionally, for the six months ended September 30, 2022, there were certain tax expense adjustments that were recorded ~~a benefit of $25.3 million related~~ to our outside basis difference in the ~~full release of~~Partnership that did not reoccur in the ~~valuation allowance as a result of the deferred tax liability recorded in connection with the Greenspring acquisition.~~six months ended September 30, 2023.

Three Months Ended ~~December 31, 2022~~September 30, 2023 Compared to Three Months Ended ~~December 31, 2021~~September 30, 2022

Income tax expense ~~decreased $16.5~~increased $15.2 million to ~~an income tax benefit of $0.7~~$7.7 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022. The increase in income tax expense was primarily ~~due~~driven by pre-tax income for the three months ended September 30, 2023 as compared to ~~the~~ pre-tax net loss for the three months ended ~~December 31,~~September 30, 2022.

~~Nine~~

Six Months Ended ~~December 31, 2022~~September 30, 2023 Compared to ~~Nine~~Six Months Ended ~~December 31, 2021~~September 30, 2022

Income tax expense ~~decreased $22.9~~increased $22.5 million to ~~an income tax benefit of $6.9~~$16.3 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The ~~decrease~~increase in income tax expense was primarily driven by pre-tax income for the six months ended September 30, 2023 as compared to pre-tax net loss for the ~~nine~~six months ended ~~December 31,~~September 30, 2022.

Net Income Attributable to Non-Controlling Interests in Subsidiaries

Net income attributable to non-controlling interests in subsidiaries increased ~~$2.5~~$0.9 million, or ~~35%~~11%, to $9.6 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.~~

Net income attributable to non-controlling interests in subsidiaries increased $7.1 million, or 38%, to $25.8 million for the nine months ended December 31, 2022 as compared to the nine months ended December 31, 2021.September 30, 2022. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

Net ~~Income (Loss)~~income attributable to non-controlling interests in subsidiaries increased $3.0 million, or 18%, to $19.2 million for the six months ended September 30, 2023 as compared to the six months ended September 30, 2022. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

Net Loss Attributable to Non-Controlling Interests in Legacy Greenspring Entities

Net income (loss) attributable to non-controlling interests in legacy Greenspring entities represents the net income or loss attributable to the interests held by the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities. Net ~~income (loss)~~loss attributable to non-controlling interests in legacy Greenspring entities was ~~$(9.0)~~$4.0 million and ~~$17.9~~$15.4 million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$(32.9)~~$6.8 million and ~~$17.9~~$24.0 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively.

Net Income (Loss) Attributable to Non-Controlling Interests in the Partnership

Net income (loss) attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B and Class C unitholders of the Partnership. Net income (loss) attributable to non-controlling interests in the Partnership was ~~$(7.6)~~$22.9 million and ~~$53.0~~$(31.2) million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$(48.2)~~$42.8 million and ~~$192.0~~$(40.6) million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively.

Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Funds

Net income attributable to redeemable non-controlling interests in Consolidated Funds was ~~$0.4~~$4.4 million and $6.0 million for ~~both~~ the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, respectively, which represents income of the Consolidated Funds attributable to third-party investors.

Key Operating Metrics

Assets Under Management

AUM was ~~$127~~$135 billion as of ~~December 31, 2021, $134~~September 30, 2022, $138 billion as of March 31, ~~2022~~2023 and ~~$134~~$146 billion as of ~~December 31, 2022.~~September 30, 2023.

Assets Under Advisement

Assets related to our advisory accounts were ~~$421~~$467 billion as of ~~December 31, 2021, $436~~September 30, 2022, $482 billion as of March 31, ~~2022~~2023 and ~~$468~~$513 billion as of ~~December 31, 2022.~~September 30, 2023.

Fee-Earning AUM

Three Months Ended ~~December 31, 2022~~September 30, 2023

FEAUM ~~increased~~decreased approximately ~~$2.9~~$0.1 billion ~~or 4%,~~ to ~~$83.0 billion as of December 31, 2022 as compared to $80.1~~$87.3 billion as of September 30, ~~2022.~~2023 as compared to June 30, 2023. During the period, FEAUM from SMAs decreased approximately $0.3 billion and FEAUM from commingled funds increased approximately $0.1 billion.

Six Months Ended September 30, 2023

FEAUM increased approximately $1.9 billion, or 2%, to $87.3 billion as of September 30, 2023 as compared to March 31, 2023. Of the increase, approximately ~~$0.5~~$1.0 billion was from SMAs and approximately ~~$2.3~~$0.8 billion was from focused commingled funds.

~~Nine Months Ended December 31, 2022~~

FEAUM increased $7.8 billion, or 10%, to $83.0 billion as of December 31, 2022 as compared to $75.2 billion as of March 31, 2022. Of the increase, approximately $3.8 billion was from SMAs and approximately $4.0 billion was from focused commingled funds.


		Three Months Ended December 31, 2022						Nine Months Ended December 31, 2022							Three Months Ended September 30, 2023						Six Months Ended September 30, 2023
(in millions)	(in millions)	SMAs		Focused Commingled Funds		Total		SMAs		Focused Commingled Funds		Total		(in millions)	SMAs		Focused Commingled Funds		Total		SMAs		Focused Commingled Funds		Total
Beginning balance	Beginning balance	$	52,881	$	27,236	$	80,117	$	49,586	$	25,587	$	75,173	Beginning balance	$	56,645	$	30,762	$	87,407	$	55,345	$	30,086	$	85,431
Contributions(1)	Contributions(1)	2,149		2,497		4,646		7,280		4,796		12,076		Contributions(1)	1,036		992		2,028		2,461		1,788		4,249
Distributions(2)	Distributions(2)	(2,178)		(168)		(2,346)		(3,211)		(854)		(4,065)		Distributions(2)	(1,459)		(988)		(2,447)		(1,888)		(1,240)		(3,128)

Market value, FX and other(3)	Market value, FX and other(3)	568		—		568		(235)		36		(199)		Market value, FX and other(3)	158		139		297		462		271		733
Ending balance	Ending balance	$	53,420	$	29,565	$	82,985	$	53,420	$	29,565	$	82,985	Ending balance	$	56,380	$	30,905	$	87,285	$	56,380	$	30,905	$	87,285

_______________________________

(1)Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.

(2)Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.

(3)Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S. dollar denominated commitments.

The following tables set forth FEAUM by asset class and selected weighted-average management fee rate data:


		As of							As of
(in millions)	(in millions)	December 31, 2022		March 31, 2022		December 31, 2021		(in millions)	September 30, 2023		March 31, 2023		September 30, 2022
FEAUM	FEAUM							FEAUM
Private equity	Private equity	$	45,048	$	40,396	$	40,044	Private equity	$	46,464	$	45,766	$	42,781
Infrastructure	Infrastructure	18,314		17,737		14,902		Infrastructure	20,122		19,274		18,592
Private debt	Private debt	14,082		12,216		11,586		Private debt	15,122		14,361		13,377
Real estate	Real estate	5,541		4,824		4,700		Real estate	5,577		6,030		5,367
Total	Total	$	82,985	$	75,173	$	71,232	Total	$	87,285	$	85,431	$	80,117


		As of							As of
		December 31, 2022		March 31, 2022		December 31, 2021			September 30, 2023		March 31, 2023		September 30, 2022
Weighted-average fee rate(1)	Weighted-average fee rate(1)							Weighted-average fee rate(1)
Private equity(2)	Private equity(2)	0.65	%	0.64	%	0.63	%	Private equity(2)	0.70	%	0.66	%	0.67	%
Real estate, infrastructure and private debt asset classes(3)	Real estate, infrastructure and private debt asset classes(3)	0.41	%	0.40	%	0.41	%	Real estate, infrastructure and private debt asset classes(3)	0.41	%	0.41	%	0.41	%
Total	Total	0.54	%	0.52	%	0.52	%	Total	0.57	%	0.54	%	0.55	%

_______________________________

(1)Weighted-average fee rates reflect the applicable management fees for the last 12 months ending on each period presented, and is inclusive of any retroactive fees for such period.

(2)The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.

(3)The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in asset class mix.

Undeployed Fee-Earning Capital

As of ~~December 31, 2022,~~September 30, 2023, we had ~~$14.0~~$18.1 billion of undeployed fee-earning capital, which will generate management fee revenue once this capital is invested or activated.

Non-GAAP Financial Measures

~~The following table presents the components~~Below is a description of ~~FRE~~our non-GAAP financial measures. These measures are presented on a basis other than GAAP and ~~ANI:~~

Three Months Ended December 31, Nine Months Ended December 31,
(in thousands) 2022 2021 2022 2021
Management and advisory fees, net $ 128,753 $ 106,384 $ 364,606 $ 268,028
Less:
Adjusted cash-based compensation 62,108 51,665 180,239 138,110
Adjusted equity-based compensation 664 178 1,965 401
Adjusted general, administrative and other 23,280 17,713 64,040 43,157
Fee-related earnings 42,701 36,828 118,362 86,360
Plus:
Realized carried interest allocations 16,320 66,559 112,396 169,053
Incentive fees 2,980 27 8,345 6,005
Deferred incentive fees — — 3,683 5,811
Realized investment income 673 1,834 4,746 6,668
Interest income 701 43 1,068 329
Other income (loss)(1)
358 (273) (1,380) (1,271)
Less:
Realized performance fee-related compensation(2)
11,726 34,033 67,091 86,122
Interest expense 1,111 543 2,515 637
Income attributable to non-controlling interests in subsidiaries:
Fee-related earnings attributable to non-controlling interests in subsidiaries(3)
10,167 7,749 28,830 19,125
Non fee-related earnings (losses) attributable to non-controlling interests in subsidiaries(4)
635 (33) 73 216
Pre-tax adjusted net income 40,094 62,726 148,711 166,855
Less: Income taxes(5)
8,941 14,145 33,163 37,626
Adjusted net income $ 31,153 $ 48,581 $ 115,548 $ 129,229
~~_______________________________~~

~~(1)Excludes amounts~~should be considered in addition to, and not as a substitute for ~~Tax Receivable Agreements adjustments recognized as other income (loss) ($(1.4) million for the nine months ended December 31, 2021).~~or superior to, financial measures calculated in accordance with GAAP.

6963

~~(2)~~Adjusted Net Income~~Includes~~

Adjusted net income (“ANI”) is a non-GAAP performance measure that we present before the consolidation of StepStone Funds on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation ~~expense related~~and legacy Greenspring investment income as none of the economics are attributable to us. The components of revenues used in the ~~portion~~determination of ANI (“adjusted revenues”) comprise adjusted management and advisory fees, net, incentive fees (including the deferred portion) and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation ~~revenue~~revenues and related compensation, (b) unrealized investment income (loss), (c) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (d) amortization of intangibles, (e) net income (loss) attributable to ~~equity holders~~non-controlling interests in subsidiaries, (f) charges associated with acquisitions and corporate transactions, and (g) certain other items that we believe are not indicative of our core operating performance. ANI is fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

Adjusted Revenues

Adjusted revenues represents the components of revenues used in the determination of ANI and comprise adjusted management and advisory fees, net, incentive fees (including the deferred portion) and realized carried interest allocations. We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.

Fee-Related Earnings

Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises adjusted management and advisory fees, net, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the ~~Company’s consolidated subsidiaries~~profits interests issued in connection with the Private Wealth Transaction, (c) amortization of intangibles, (d) charges associated with acquisitions and corporate transactions, and (e) certain other items that we believe are not ~~100% owned ($2.2~~indicative of our core operating performance. FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenues.

Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

ANI per share measures our per-share earnings assuming all Class B units and Class C units in the Partnership were exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted weighted-average shares outstanding. We believe adjusted weighted-average shares and ANI per share are useful to investors because they enable investors to better evaluate per-share operating performance across reporting periods.

Fee-Related Earnings

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

FRE increased $4.8 million, ~~and $0.3~~or 12%, to $43.8 million for the three months ended ~~December 31,~~September 30, 2023 as compared to the three months ended September 30, 2022, primarily reflecting higher adjusted management and ~~2021, respectively,~~advisory fees, net, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and ~~$9.0~~other expenses, and adjusted equity-based compensation.

Six Months Ended September 30, 2023 Compared to Six Months Ended September 30, 2022

FRE increased $12.6 million, ~~and $0.5~~or 17%, to $88.2 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 as compared to the six months ended September 30, 2022, primarily reflecting higher adjusted management and ~~2021, respectively).~~

~~(3)Reflects the portion of fee-related earnings of our subsidiaries attributable to non-controlling interests.~~

~~(4)Reflects components of pre-tax~~advisory fees, net, partially offset by higher adjusted ~~net income of our subsidiaries attributable to non-controlling interests other than fee-related earnings, including incentive fees and related~~cash-based compensation, ~~realized investment income, net interest expense~~adjusted general, administrative and other ~~income (loss).~~

~~(5)Represents corporate income taxes at a blended statutory rate of 22.3% applied to pre-tax~~expenses, and adjusted net income for the three and nine months ended December 31, 2022, and a blended statutory rate of 22.6% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2021. The 22.3% rate for the three and nine months ended December 31, 2022 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.3%, and the 22.6% rate for the three and nine months ended December 31, 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%.equity-based compensation.

Adjusted Revenues and Adjusted Net Income

Three Months Ended ~~December 31, 2022~~September 30, 2023 Compared to Three Months Ended ~~December 31, 2021~~September 30, 2022

Adjusted revenues decreased ~~$24.9~~$0.8 million, or ~~14%~~1%, to ~~$148.1~~$149.8 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting lower realized carried interest allocation revenues and incentive fees (including the deferred portion), partially offset by increases in ~~net~~adjusted management and advisory fees, ~~and incentive fees.~~net.

ANI decreased ~~$17.4~~$7.1 million, or ~~36%~~19%, to ~~$31.2~~$30.2 million for the three months ended ~~December 31, 2022~~September 30, 2023 as compared to the three months ended ~~December 31, 2021,~~September 30, 2022, primarily due to lower net realized performance fee-related earnings (incentive fees, including the deferred portion, plus realized carried interest allocation revenues, less realized performance fee-related compensation), higher interest expense, lower realized investment income and a higher allocation of income to non-controlling interests. The overall decrease was partially offset by the increase in FRE as discussed ~~below.~~above.

~~Nine~~Six Months Ended ~~December 31, 2022~~September 30, 2023 Compared to ~~Nine~~Six Months Ended ~~December 31, 2021~~September 30, 2022

Adjusted revenues ~~increased $40.1~~decreased $38.4 million, or 9%11%, to ~~$489.0~~$302.6 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily reflecting ~~increases in net management and advisory fees and incentive fees, including the deferred portion, partially offset by~~ lower realized carried interest allocation ~~revenues.~~revenues and incentive fees (including the deferred portion), partially offset by increases in adjusted management and advisory fees, net.

ANI decreased ~~$13.7~~$24.8 million, or ~~11%~~29%, to ~~$115.5~~$59.6 million for the ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 as compared to the ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily due to lower net realized performance fee-related earnings, ~~and~~ a higher allocation of income to non-controlling ~~interests.~~interests, higher interest expense and lower realized investment income. The overall decrease was partially offset by the increase in FRE as discussed ~~below.~~above.

7065

Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted weighted-average shares outstanding used in the computation of ANI per share for the three and ~~nine~~six months ended ~~December 31, 2022~~September 30, 2023 and ~~2021.~~2022.


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)									(in thousands, except share and per share amounts)
Adjusted net income		$	31,153	$	48,581	$	115,548	$	129,229
ANI										ANI	$	30,173	$	37,261	$	59,561	$	84,395

Weighted-average shares of Class A common stock outstanding – Basic	Weighted-average shares of Class A common stock outstanding – Basic	62,192,899		57,875,758		61,583,215		46,247,353		Weighted-average shares of Class A common stock outstanding – Basic	62,858,468		61,407,834		62,846,708		61,276,707
Assumed vesting of RSUs	Assumed vesting of RSUs	457,818		1,125,798		722,935		1,390,538		Assumed vesting of RSUs	801,014		913,479		601,620		856,217
Assumed vesting and exchange of Class B2 units	Assumed vesting and exchange of Class B2 units	2,486,197		2,481,677		2,467,141		2,480,591		Assumed vesting and exchange of Class B2 units	2,538,647		2,466,194		2,521,725		2,457,561
Exchange of Class B units in the Partnership(1)	Exchange of Class B units in the Partnership(1)	46,662,062		50,327,243		46,898,733		53,511,397		Exchange of Class B units in the Partnership(1)	46,417,845		46,889,995		46,418,987		47,017,716
Exchange of Class C units in the Partnership(2)	Exchange of Class C units in the Partnership(2)	2,852,187		3,003,274		2,903,186		1,116,423		Exchange of Class C units in the Partnership(2)	2,502,086		2,928,824		2,508,053		2,928,824
Adjusted shares		114,651,163		114,813,750		114,575,210		104,746,302
Adjusted weighted-average shares										Adjusted weighted-average shares	115,118,060		114,606,326		114,897,093		114,537,025

Adjusted net income per share		$	0.27	$	0.42	$	1.01	$	1.23
ANI per share										ANI per share	$	0.26	$	0.33	$	0.52	$	0.74

_______________________________

(1)Assumes the full exchange of Class B units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement.

(2)Assumes the full exchange of Class C units in the Partnership for Class A common stock of SSG pursuant to the Class C Exchange Agreement.

~~Fee-Related Earnings~~

~~Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021~~

FRE increased $5.9 million, or 16%, to $42.7 million for the three months ended December 31, 2022 as compared to the three months ended December 31, 2021, primarily reflecting higher net management and advisory fees, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses, and adjusted equity-based compensation.

~~Nine Months Ended December 31, 2022 Compared to Nine Months Ended December 31, 2021~~

FRE increased $32.0 million, or 37%, to $118.4 million for the nine months ended December 31, 2022 as compared to the nine months ended December 31, 2021, primarily reflecting higher net management and advisory fees, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses, and adjusted equity-based compensation.

Reconciliation of GAAP to Non-GAAP Financial Measures

The table below shows a reconciliation of revenues to adjusted revenues.


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Total revenues	Total revenues	$	(4,235)	$	410,465	$	(239,948)	$	1,000,835	Total revenues	$	191,422	$	(158,495)	$	369,433	$	(235,713)
Unrealized carried interest allocations	Unrealized carried interest allocations	63,367		(132,535)		354,095		(452,789)		Unrealized carried interest allocations	(55,371)		176,778		(104,735)		290,728
Deferred incentive fees	Deferred incentive fees	—		—		3,683		5,811		Deferred incentive fees	942		3,683		942		3,683
Legacy Greenspring carried interest allocations	Legacy Greenspring carried interest allocations	88,921		(104,960)		371,200		(104,960)		Legacy Greenspring carried interest allocations	12,603		128,672		36,550		282,279
Management and advisory fee revenues for the Consolidated Funds(1)										Management and advisory fee revenues for the Consolidated Funds(1)	204		—		390		—
Adjusted revenues	Adjusted revenues	$	148,053	$	172,970	$	489,030	$	448,897	Adjusted revenues	$	149,800	$	150,638	$	302,580	$	340,977

______________________________

(1)Reflects the add back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

The table below shows a reconciliation of ~~expenses~~GAAP measures to ~~adjusted expenses.~~additional non-GAAP measures. We use the non-GAAP measures presented below as components when calculating FRE and ANI. We believe these additional non-GAAP measures are useful to investors in evaluating both the baseline earnings from recurring management and advisory fees, which provide additional insight into the operating profitability of our business, and the after-tax net realized income attributable to us, allowing investors to evaluate the performance of our business. These additional non-GAAP measures remove the impact of Consolidated Funds that we are required to consolidate under GAAP, and certain other items that we believe are not indicative of our core operating performance.

Three Months Ended December 31, Nine Months Ended December 31,
(in thousands) 2022 2021 2022 2021
Cash-based compensation $ 62,628 $ 51,665 $ 182,190 $ 138,217
Adjustments(1)
(520) — (1,951) (107)
Adjusted cash-based compensation $ 62,108 $ 51,665 $ 180,239 $ 138,110
Equity-based compensation $ 8,108 $ 3,407 $ 15,605 $ 10,363
Adjustments(2)
(7,444) (3,229) (13,640) (9,962)
Adjusted equity-based compensation $ 664 $ 178 $ 1,965 $ 401
General, administrative and other $ 43,582 $ 30,299 $ 111,547 $ 72,049
Adjustments(3)
(20,302) (12,586) (47,507) (28,892)
Adjusted general, administrative and other $ 23,280 $ 17,713 $ 64,040 $ 43,157


	Three Months Ended September 30,				Six Months Ended September 30,
(in thousands)	2023		2022		2023		2022












GAAP management and advisory fees, net	$	142,123	$	119,121	$	280,238	$	235,853
Management and advisory fee revenues for the Consolidated Funds(1)	204		—		390		—
Adjusted management and advisory fees, net	$	142,327	$	119,121	$	280,628	$	235,853

GAAP interest income	$	977	$	356	$	1,408	$	367
Interest income earned by the Consolidated Funds(2)	(249)		—		(493)		—
Adjusted interest income	$	728	$	356	$	915	$	367

GAAP other loss	$	(872)	$	(634)	$	(645)	$	(1,738)
Adjustments(3)	403		—		27		—
Adjusted other loss	$	(469)	$	(634)	$	(618)	$	(1,738)

______________________________

(1)Reflects the ~~removal~~add-back of ~~severance~~management and ~~compensation paid to certain employees as part of an acquisition earn-out.~~advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

(2)Reflects the removal of ~~equity-based compensation for awards granted prior to and in connection with~~interest income earned by the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction.Consolidated Funds.

(3)Reflects the removal of ~~lease remeasurement adjustments, accelerated depreciation~~amounts for the removal of ~~leasehold improvements for changes in lease terms, amortization~~the impact of ~~intangibles, transaction-related costs and other non-core operating income and expenses.~~the consolidation of the Consolidated Funds.

7267

The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended September 30,				Six Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Income (loss) before income tax	Income (loss) before income tax	$	(14,287)	$	142,080	$	(108,959)	$	396,739	Income (loss) before income tax	$	66,980	$	(74,487)	$	125,023	$	(94,672)
Net income attributable to non-controlling interests in subsidiaries(1)	Net income attributable to non-controlling interests in subsidiaries(1)	(10,802)		(7,716)		(28,903)		(19,341)		Net income attributable to non-controlling interests in subsidiaries(1)	(10,321)		(9,985)		(20,861)		(18,101)
Net (income) loss attributable to non-controlling interests in legacy Greenspring entities		8,966		(17,890)		32,927		(17,890)
Net loss attributable to non-controlling interests in legacy Greenspring entities										Net loss attributable to non-controlling interests in legacy Greenspring entities	3,966		15,357		6,832		23,961

Unrealized carried interest allocations	Unrealized carried interest allocations	63,367		(132,535)		354,095		(452,789)		Unrealized carried interest allocations	(55,371)		176,778		(104,735)		290,728
Unrealized performance fee-related compensation	Unrealized performance fee-related compensation	(31,875)		68,368		(172,554)		228,146		Unrealized performance fee-related compensation	28,712		(86,126)		52,923		(140,679)
Unrealized investment (income) loss	Unrealized investment (income) loss	1,354		(5,396)		10,219		(14,173)		Unrealized investment (income) loss	(1,657)		5,795		(4,186)		8,865
Unrealized investment income of Consolidated Funds		(4,895)		—		(4,895)		—
Impact of Consolidated Funds										Impact of Consolidated Funds	(8,223)		—		(10,870)		—
Deferred incentive fees	Deferred incentive fees	—		—		3,683		5,811		Deferred incentive fees	942		3,683		942		3,683
Equity-based compensation(2)	Equity-based compensation(2)	7,444		3,229		13,640		9,962		Equity-based compensation(2)	4,644		3,125		11,815		6,196
Amortization of intangibles	Amortization of intangibles	10,870		10,958		32,611		13,448		Amortization of intangibles	10,661		10,870		21,322		21,741

Tax Receivable Agreements adjustments through earnings		—		—		—		1,391

Non-core items(3)	Non-core items(3)	9,952		1,628		16,847		15,551		Non-core items(3)	(1,500)		2,945		(1,550)		6,895
Pre-tax adjusted net income		40,094		62,726		148,711		166,855
Pre-tax ANI										Pre-tax ANI	38,833		47,955		76,655		108,617
Income taxes(4)	Income taxes(4)	(8,941)		(14,145)		(33,163)		(37,626)		Income taxes(4)	(8,660)		(10,694)		(17,094)		(24,222)
Adjusted net income		31,153		48,581		115,548		129,229
ANI										ANI	30,173		37,261		59,561		84,395
Income taxes(4)	Income taxes(4)	8,941		14,145		33,163		37,626		Income taxes(4)	8,660		10,694		17,094		24,222
Realized carried interest allocations	Realized carried interest allocations	(16,320)		(66,559)		(112,396)		(169,053)		Realized carried interest allocations	(1,585)		(22,469)		(16,058)		(96,076)
Realized performance fee-related compensation(5)	Realized performance fee-related compensation(5)	11,726		34,033		67,091		86,122		Realized performance fee-related compensation(5)	1,720		13,630		10,822		55,365
Realized investment income	Realized investment income	(673)		(1,834)		(4,746)		(6,668)		Realized investment income	(1,423)		(2,104)		(1,980)		(4,073)
Incentive fees	Incentive fees	(2,980)		(27)		(8,345)		(6,005)		Incentive fees	(4,946)		(5,365)		(4,952)		(5,365)
Deferred incentive fees	Deferred incentive fees	—		—		(3,683)		(5,811)		Deferred incentive fees	(942)		(3,683)		(942)		(3,683)
Interest income		(701)		(43)		(1,068)		(329)
Adjusted interest income(6)										Adjusted interest income(6)	(728)		(356)		(915)		(367)
Interest expense	Interest expense	1,111		543		2,515		637		Interest expense	2,108		817		4,120		1,404
Other (income) loss(6)		(358)		273		1,380		1,271
Adjusted other loss(6)										Adjusted other loss(6)	469		634		618		1,738

Net income attributable to non-controlling interests in subsidiaries(1)	Net income attributable to non-controlling interests in subsidiaries(1)	10,802		7,716		28,903		19,341		Net income attributable to non-controlling interests in subsidiaries(1)	10,321		9,985		20,861		18,101

Fee-related earnings		$	42,701	$	36,828	$	118,362	$	86,360
FRE										FRE	$	43,827	$	39,044	$	88,229	$	75,661

_______________________________

(1)Reflects the portion of pre-tax ~~adjusted net income~~ANI of our subsidiaries attributable to non-controlling interests.

(2)Reflects equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth ~~transaction.~~Transaction.

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(3)Includes (income) expense related to transaction costs ($~~6.8~~0.2 million for the three and six months ended ~~December 31, 2022, and $6.8 million and $13.8 million for the nine months ended December 31, 2022 and 2021, respectively)~~September 30, 2023), lease remeasurement adjustments ($(2.7) million for the ~~nine~~three and six months ended ~~December 31,~~September 30, 2022), accelerated depreciation of leasehold improvements for changes in lease terms ($0.6 million and ~~$0.8~~$0.2 million for the three months ended September 30, 2023 and 2022, respectively, $1.3 million and $0.2 million for the six months ended September 30, 2023 and 2022, respectively), severance costs ($0.1 million and $0.2 million for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2022, respectively), ~~severance costs ($42 thousand for the three months ended December 31, 2022, and $0.2 million and $0.1 million for the nine months ended December 31, 2022 and 2021, respectively),~~(gain) loss on change in fair value for contingent consideration obligation ($~~2.0~~(2.9) million and ~~$1.6~~$4.7 million for the three months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, ~~and $9.9~~$(4.1) million and ~~$1.6~~$8.0 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively), compensation paid to certain employees as part of an acquisition earn-out ($~~0.5 million and $1.7~~0.6 million for the three ~~and nine~~ months ended ~~December 31,~~September 30, 2023 and 2022, respectively, $1.1 million and $1.3 million for the six months ended September 30, 2023 and 2022, respectively) and other non-core operating income and expenses.

(4)Represents corporate income taxes at a blended statutory rate of 22.3% applied to pre-tax ~~adjusted net income~~ANI for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and a blended statutory rate of 22.6% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2021. The 22.3% rate for the three and nine months ended December 31, 2022~~which is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.3%~~, and the 22.6% rate for the three and nine months ended December 31, 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%~~.

(5)Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned ($~~2.2 million and $0.3~~2.4 million for the three months ended ~~December 31,~~September 30, 2022, ~~and 2021, respectively, and $9.0~~$2.2 million and ~~$0.5~~$6.8 million for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively).

(6)Excludes ~~amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(1.4) million for~~ the ~~nine months ended December 31, 2021).~~impact of consolidating the Consolidated Funds.

Investment Performance

The following table presents information relating to the performance of all the investments that StepStone has recommended and subsequently tracked across asset classes and investment strategies, except as set forth in greater detail below. The data for these investments is generally presented from the inception date of each strategy and asset class through ~~September~~June 30, ~~2022~~2023 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

The historical results of our investments are not indicative of future results to be expected of existing or new investment funds, and are not a proxy for the performance of our Class A common stock, including because:

•market conditions and investment opportunities may differ from those in the past;

•the performance of our funds is largely based on the NAV (as defined below) of the funds’ investments, including unrealized gains, which may never be realized;

•newly-established funds may generate lower investment returns during the period that they initially deploy their capital;

•changes in the global tax and regulatory environment may impact both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing investment returns in the future;

•competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing investment returns in the future; and

•the industries and businesses in which particular funds invest will vary.

Historical and future returns of investments included in our track record are not directly correlated to potential returns on our Class A common stock.

For the purposes of the following table:

•“Invested capital” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls;

•“NAV” refers to the estimated fair value of unrealized investments plus any net assets or liabilities associated with the investment as of ~~September~~June 30, ~~2022;~~2023;

•“IRR” refers to the annualized internal rate of return for all investments within the relevant investment strategy on an inception-to-date basis as of ~~September~~June 30, ~~2022~~2023 (except as noted otherwise below), based on contributions, distributions and unrealized value;

•“Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone; and

•“Net TVM” refers to the total value to paid-in capital or invested capital expressed as a multiple, and is calculated as distributions plus unrealized valuations divided by invested capital (including all capitalized costs).

StepStone Performance Summary by Asset Class

PRIVATE EQUITY

REAL ESTATE

INFRASTRUCTURE

PRIVATE DEBT

PRIVATE EQUITY

REAL ESTATE

INFRASTRUCTURE

PRIVATE DEBT

INVESTMENT STRATEGY(1,2,4)

NET IRR(3)

NET TVM(3)

INVESTMENT STRATEGY(1,4,5)

NET IRR(3)

NET TVM(3)

INVESTMENT STRATEGY(1,4,6)

NET IRR(3)

INVESTMENT STRATEGY(1,4,8)

NET IRR(3)

INVESTMENT STRATEGY(1,2,4)

NET IRR(3)

NET TVM(3)

INVESTMENT STRATEGY(1,4,5)

NET IRR(3)

NET TVM(3)

INVESTMENT STRATEGY(1,4,6)

NET IRR(3)

INVESTMENT STRATEGY(1,4,8)

NET IRR(3)

Primaries

17.3%

1.6x

Core/Core+ fund investments

9.3%

1.6x

Primaries

11.1%

Direct lending

6.2%

Primaries

16.6%

1.6x

Core/Core+ fund investments

6.3%

1.4x

Primaries

10.1%

Direct lending

7.1%

Secondaries

18.2%

1.5x

Value-add/opportunistic fund investments

10.3%

1.4x

Secondaries

10.3%

Distressed debt

8.8%

Secondaries

17.2%

1.5x

Value-add/opportunistic fund investments

9.6%

1.3x

Secondaries

10.9%

Distressed debt

9.0%

Co-investments

19.8%

1.7x

Real estate debt fund investments

6.0%

1.2x

Co-investments(7)

9.4%

Other(9)

6.3%

Co-investments

19.2%

1.7x

Real estate debt fund investments

5.6%

1.1x

Co-investments(7)

8.9%

Other(9)

7.2%

Value-add/opportunistic secondaries & co-investments

15.3%

1.3x

Value-add/opportunistic secondaries & co-investments

13.0%

1.3x

_______________________________

(1)Investment returns reflect NAV data for underlying investments as of ~~September~~June 30, ~~2022,~~2023, as reported by underlying managers up to the business day occurring on or after100 days following ~~September~~June 30, ~~2022.~~2023. For investment returns where NAV data is not available by the business day occurring on or after100 days following ~~September~~June 30, ~~2022,~~2023, such NAVs are adjusted for cash activity following the last available reported NAV. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

(2)Private ~~Equity~~equity includes ~~1,458~~2,489 investments totaling ~~$149.4~~$177.2 billion of capital commitments and excludes (i) two advisory co-investments, totaling $100.0 million of capital commitments, (ii) ~~all~~261 client-directed private equity investments, ~~(191 investments~~ totaling ~~$26.6~~$29.7 billion of capital ~~commitments),~~commitments, and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the ~~investment,~~investment. Private Equity includes buyout, venture capital, growth equity, fund-of-funds, and ~~(iv) Greenspring investments until the data integration is completed.~~energy focused strategies.

(3)Net IRR and Net TVM are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds represented above and are net of fees and expenses charged by both the underlying investment and hypothetical StepStone fees. The aggregate returns are not indicative of the returns an individual investor would receive from these investments. No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years. StepStone fees and expenses are based on the following assumptions (management fees and expenses represent an annual rate):

i.Primaries: 25 basis points of net invested capital for management fees (and on NAV for private debt), charged quarterly.

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ii.Secondaries: 125 basis points (60 basis points for ~~Infrastructure)~~infrastructure) of capital commitments in years 1 through 4 for management fees, charged quarterly. In year 5, management fees step down to 90% of the previous year’s ~~fee.~~fee; 65 basis points for private debt, assessed quarterly on the net asset value.

iii.Co-investments: 100 basis points (85 and 50 basis points for infrastructure co-investments and direct asset management investments, ~~respectively, of~~respectively) on net committed capital for management fees, charged ~~quarterly.~~quarterly; 65 basis points for private debt, assessed quarterly on the net asset value.

iv.All investment types assess 5 basis points of capital commitments for fund expenses, charged quarterly, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

v.Private ~~Equity~~equity and ~~Infrastructure~~infrastructure secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle. Real ~~Estate~~estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle. Private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with an 5.0% preferred return hurdle.

Net IRR and Net TVM for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles. Reinvested/recycled amounts increase contributed capital.

(4)Investments of former clients are included in performance summary past the client termination date until such time as StepStone stops receiving current investment data (quarterly valuations and cash flows) for the investment. At that point, StepStone will then ‘liquidate’ the fund by entering a distribution amount equal to the last reported NAV, thus ending its contribution to the track record as of that date. Historical performance contribution will be maintained up until the ‘liquidation’ date.

(5)Real ~~Estate~~estate includes ~~454~~475 investments totaling ~~$70.8~~$75.9 billion of capital commitments and excludes (i) ~~all~~86 client-directed real estate investments, ~~(74 investments~~ totaling ~~$11.3~~$13.2 billion of capital ~~commitments),~~commitments, (ii) ~~nine~~11 secondary/co-investment core/core+ or credit investments, totaling ~~$709.1~~$655.9 million of capital commitments, (iii) four advisory fund investments totaling $463.6 million of capital commitments, and (iv) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. ~~Includes the discretionary track record of Courtland Partners, Ltd., which StepStone acquired on April 1, 2018 (the “Courtland acquisition”).~~

(6)Infrastructure includes ~~212~~243 investments totaling ~~$43.8~~$50.9 billion of capital commitments and excludes (i) 11 infrastructure investments made by the Partnership prior to the formation of the ~~Infrastructure~~infrastructure subsidiary in 2013 or made prior to ~~the~~StepStone’s acquisition of Courtland ~~acquisition~~Partners, Ltd. on April 1, 2018 (the “Courtland acquisition”), totaling $501.9 million of capital commitments, (ii) ~~all~~29 client-directed infrastructure investments, ~~(24 investments~~ totaling ~~$3.8~~$4.5 billion of capital ~~commitments),~~commitments, and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(7)~~Includes~~Co-investments includes venture capital and growth equity direct investments for private equity, and asset management ~~investments.~~direct investments for infrastructure.

(8)Private ~~Debt~~debt includes ~~797~~870 investments totaling ~~$42.1~~$45.7 billion of capital commitments and excludes (i) ~~all~~41 client-directed debt investments, ~~(32 investments,~~ totaling ~~$2.5~~$2.9 billion of capital ~~commitments),~~commitments, (ii) 54 real estate credit investments that were recommended by Courtland Partners, Ltd. prior to the Courtland acquisition, ~~(54 investments~~ totaling $5.2 billion of capital commitments), and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. IRR is presented solely for illustrative purposes and does not represent actual returns received by any investor in any of the StepStone Funds represented above. No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years. StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate): Private Debt fund investments include 65 basis points on the quarterly NAV for management fees, charged quarterly. Net IRR for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles. Reinvested/recycled amounts increase contributed capital.

(9)Other includes mezzanine debt, collateralized loan obligations, leasing, regulatory capital, trade finance, intellectual property/royalty, real estate debt and infrastructure debt.

Liquidity and Capital Resources

Sources and Uses of Liquidity

We generate cash primarily from management and advisory fees and realized carried interest allocations. We have historically managed our liquidity and capital resource needs through (a) cash generated from our operating activities, (b) realizations from investment activities, (c) borrowings, interest payments and repayments under credit agreements and other borrowing arrangements, (d) funding capital commitments to our funds, and (e) funding our growth initiatives, including capital expenditures and acquisitions to expand into new businesses.

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As of ~~December 31, 2022,~~September 30, 2023, we had ~~$141.0~~$118.2 million of cash, cash equivalents and restricted cash ($176.8 million including Consolidated Funds) and ~~$1,235.5~~$1,461.5 million of investments in StepStone Funds, including ~~$1,126.4~~$1,331.8 million of accrued carried interest allocations, against ~~$83.2~~$123.6 million in debt obligations, net of debt issuance costs, and ~~$597.3~~$697.4 million in accrued carried interest-related compensation payable.

Ongoing sources of cash include (a) management and advisory fees, which are collected monthly or quarterly, (b) carried interest allocations and incentive fees, which are volatile and largely unpredictable as to amount and timing; and (c) distributions from our investments in the StepStone Funds. We use cash flow from operations and distributions from our investments in the StepStone Funds to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures, dividends to our stockholders and distributions to holders of Partnership units, and to make investments in the StepStone Funds. We believe we will have sufficient cash to meet our obligations for the next 12 months.

Cash Flows

The accompanying condensed consolidated cash flows include the Consolidated Funds, which activities primarily consist of raising capital from third-party investors, purchasing investments, making payment for the operating costs of the fund, generating cash flows from realized income allocations of investments and sales of investments, and making distributions to investors. The Consolidated Funds are accounted for as investment companies and therefore the cash flows from investing activities are included in cash flows from operations.

The following table summarizes our cash flows attributable to operating, investing and financing activities:


		Nine Months Ended December 31,					Six Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	151,699	$	181,978	Net cash provided by operating activities	$	128,717	$	145,714
Net cash used in investing activities	Net cash used in investing activities	(23,412)		(201,475)		Net cash used in investing activities	(27,405)		(17,312)
Net cash used in financing activities	Net cash used in financing activities	(104,652)		(27,073)		Net cash used in financing activities	(53,434)		(102,849)
Effect of exchange rate changes	Effect of exchange rate changes	(53)		(377)		Effect of exchange rate changes	(593)		1,481
Net increase (decrease) in cash, cash equivalents and restricted cash		$	23,582	$	(46,947)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	$	47,285	$	27,034

Operating Activities

Operating activities provided ~~$151.7~~$128.7 million and ~~$182.0~~$145.7 million of cash for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively. For the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, these amounts primarily consisted of the following:

•net income, ~~(loss),~~ after adjustments for non-cash items (including unrealized carried interest allocations, unrealized performance fee-related compensation, unrealized investment income and acquisition-related contingent consideration), of ~~$166.6~~$110.2 million and ~~$167.0~~$120.8 million;

•net change in operating assets and liabilities of ~~$(0.4)~~$49.9 million and ~~$15.0~~$24.9 million;

•adjustments for ~~non-cash items~~unrealized investment income from Consolidated Funds of ~~$(4.9)~~$(11.1) million and $0 million;

•net purchases of investments of Consolidated Funds of ~~$9.4~~$26.8 million and $0 million; and

•net change in operating assets and liabilities of Consolidated Funds of ~~$(0.2)~~$6.5 million and $0 million.

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Investing Activities

Investing activities used ~~$23.4~~$27.4 million and ~~$201.5~~$17.3 million of cash for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and primarily consisted of the following amounts:

•net contributions to investments of ~~$12.4~~$10.2 million and ~~$10.3~~$8.9 million;

•net contributions to investments in legacy Greenspring entities of ~~$7.9~~$2.6 million and ~~$8.1~~$6.3 million; and

•purchases of fixed assets of ~~$3.1~~$14.6 million and ~~$1.6 million; and~~

•~~cash payments for acquisitions, net of cash acquired, of $0 million and $181.5~~$2.1 million.

Financing Activities

Financing activities used ~~$104.7~~$53.4 million and ~~$27.1~~$102.8 million of cash for the ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022, ~~and 2021,~~ respectively, and primarily consisted of the following:

•~~net~~ sale of non-controlling interests of $3.0 million and $0 million;

•borrowings on revolving credit facility ~~(including payment~~ of ~~deferred financing costs) of $20.0~~$25.0 million and ~~$62.6 million;~~

•~~purchase of non-controlling interests of~~ $0 ~~million and $3.0 million;~~

•~~payment of deferred offering costs of $0 million and $1.3~~ million;

•distributions to non-controlling interests of ~~$87.2~~$58.9 million and ~~$74.5~~$73.8 million;

•proceeds from capital contributions to legacy Greenspring entities of ~~$10.6~~$4.6 million and ~~$9.1~~$8.8 million;

•distributions to non-controlling interests in legacy Greenspring entities of ~~$6.8~~$6.2 million and ~~$4.6~~$5.9 million;

•dividends paid to common stockholders of ~~$37.4~~$41.5 million and ~~$14.8~~$24.5 million;

•payments for employee taxes related to the net settlement of RSUs of ~~$2.7~~$0.6 million and $0$2.7 million;

•payments to related parties under the Tax Receivable Agreements of ~~$6.0~~$7.7 million and ~~$0.7~~$4.8 million; and

•contributions from redeemable non-controlling interests in Consolidated Funds of ~~$4.6~~$28.7 million and $0 million.

Revolving Credit Facility

~~In September 2021, we entered into~~We are party to the Credit Agreement ~~in connection with the Greenspring acquisition. The Credit Agreement~~that was arranged by JPMorgan Chase Bank, N.A., as administrative agent, and provides for a $225.0 million multicurrency Revolver with a five-year maturity. As of ~~December 31, 2022,~~September 30, 2023, we had ~~$83.2~~$123.6 million outstanding on the Revolver, net of debt issuance costs.

Borrowings under the Revolver bear interest at a variable rate per annum. We may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a ~~LIBOR~~Term SOFR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a Sterling Overnight Index Average (“SONIA”) loan, (iv) in the case of any borrowing denominated in Swiss Francs, a Swiss Average Rate Overnight (“SARON”) loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan. Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month ~~LIBOR, multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement),~~Term SOFR, plus ~~1.00%~~1.10%, (ii) in the case of a ~~LIBOR~~Term SOFR rate loan, the ~~LIBOR~~Term SOFR rate ~~multiplied by the Statutory Reserve Rate~~ plus ~~2.00%~~2.10%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement) plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%., in certain cases subject to applicable interest rate floors. The weighted-average interest rate in effect for the Revolver as of ~~December 31, 2022~~September 30, 2023 was ~~6.42%~~7.48%.

Under the terms of the Credit Agreement, certain of our assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things: limit our ability to incur indebtedness; create, incur or allow liens; transfer or dispose of assets; merge with other companies; make certain investments; pay dividends or make distributions; engage in new or different lines of business; and engage in transactions with affiliates. The Credit Agreement also contains financial covenants requiring us to maintain a total net leverage ratio, and a minimum total of fee-earning assets under management. As of ~~December 31, 2022,~~September 30, 2023, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.

We can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $10.0 million. Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver. As of ~~December 31, 2022,~~September 30, 2023, we had outstanding letters of credit totaling ~~$7.8~~$7.9 million.

Equity Transactions

In ~~June 2022,~~September 2023, we issued ~~257,776~~105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for ~~257,776~~105,598 Class B ~~units. A corresponding number of shares of~~units pursuant to the Class B ~~common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.~~

In September 2022, we issued 175,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 175,000 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

~~In December 2022, we issued 296,756 shares of Class A common stock to certain limited partners of the Partnership in exchange for 296,756 Class B units.~~Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We also issued ~~414,739~~551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for ~~414,739~~551,954 Class C ~~units.~~units pursuant to the Class C Exchange Agreement and a corresponding number of Class A units of the partnership were issued to us.

Future Sources and Uses of Liquidity

In the future, we may issue additional equity or debt with the objective of increasing our available capital. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents, and our ability to obtain future financing.

Dividend and Distribution Policy

On ~~February 9,~~November 6, 2023, we announced a dividend of ~~$0.20~~$0.21 per share of Class A common stock, payable on ~~March~~December 15, 2023 to holders of record at the close of business on ~~February 28,~~November 30, 2023.

The following table presents information regarding cash quarterly dividends on Class A common shares for the periods indicated:

Quarterly Fiscal Period1

Dividend Payment Date

Dividend Per Share of Class A Common Stock

First quarter

~~July 15, 2021~~

~~0.07~~

~~Second quarter~~

~~September 15, 2021~~

~~0.07~~

~~Third quarter~~

~~December 15, 2021~~

~~0.15~~

~~Fourth quarter~~

~~March 15, 2022~~

~~0.15~~

~~Total dividends paid in FY2022~~

~~0.44~~

~~First quarter~~

June 30, 2022

0.20

Second quarter

September 15, 2022

0.20

Third quarter

December 15, 2022

0.20

Fourth quarter

March 15, 2023

0.20

Total dividends paid in FY2023

~~0.60~~0.80

First quarter

June 30, 2023

0.20

Supplemental2

June 30, 2023

0.25

Second quarter

September 15, 2023

0.21

Total dividends paid in FY2024

0.66

_______________________________

(1)Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.

(2)The supplemental cash dividend relates to earnings in respect of our full fiscal year 2023.

We may pay additional dividends to holders of our Class A common stock in the future. The declaration and payment by us of any future dividends to Class A stockholders is at the sole discretion of our board of directors. Subject to funds being legally available, we will cause the Partnership to make pro rata distributions to its limited partners, including us, in amounts sufficient to make payment of applicable income and other taxes, to make payments under the Tax Receivable Agreements, and to make payment for corporate and other general expenses. Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if the Partnership makes excess distributions to us.

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Tax Receivable Agreements

We have entered into an Exchanges Tax Receivable Agreement with the Class B limited partners and Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”). The Tax Receivable Agreements provide for payment by SSG to these partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partner’s and institutional investor’s Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15% of these net cash tax savings under both Tax Receivable Agreements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that would expose us to any liability or require us to fund losses or guarantee target returns to clients in our funds that are not reflected in our condensed consolidated financial statements. See notes 4 and ~~15,~~14, respectively, to our condensed consolidated financial statements included elsewhere in this quarterly report for information on variable interest entities and commitments and contingencies.

Critical Accounting Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and judgments, however, are both subjective and subject to change, and actual amounts may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

See note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report, and note 2 to our audited consolidated financial statements in our Form 10-K for the year ended March 31, ~~2022~~2023 for a summary of our significant accounting policies.

Recent Accounting Developments

Information regarding recent accounting developments and their effects to us can be found in note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, counterparty risk and foreign exchange-rate risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit markets or financial market dislocations.

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Market Risk

Our predominant exposure to market risk is related to our role as general partner or investment manager for our focused commingled funds and SMAs and the sensitivities to movements in the fair value of their investments, which may adversely affect our performance fee revenues and investment income.

Our management fee and advisory fee revenue is only marginally affected by changes in investment values because our management fees are generally based on commitments or net invested capital and our advisory fees are fixed. As of ~~December~~September 30, 2023, and March 31, ~~2022,~~2023, NAV-based management fees represented approximately 5%8% and 7%, respectively, of total net management and advisory fees. We estimate that a 10% decline in market values of the investments held in our funds as of ~~December~~September 30, 2023 and March 31, ~~2022~~2023, would result in an approximate ~~$2.6 million~~ decrease to annual management ~~fees.~~fees of $4.2 million and $3.4 million, respectively.

The fair value of the financial assets and liabilities of our focused commingled funds and SMAs may fluctuate in response to changes in the fair value of a fund’s underlying investments, foreign currency exchange rates, commodity prices and interest rates. The effect of these risks is as follows:

•Incentive fees from our funds are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the fund’s assets prior to realization. As of ~~December~~September 30, 2023 and March 31, ~~2022,~~2023, we had ~~$17.8~~$19.0 million and $18.1 million, respectively, of deferred incentive fee revenue recorded in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets.

•We earn carried interest allocation revenue from certain of the StepStone Funds based on cumulative fund performance to date, subject to specified performance criteria. Our carried interest allocation is affected by changes in market factors. However, the degree of impact will vary depending on several factors, including but not limited to (i) the performance criteria for each individual fund in relation to how that fund’s results of operations are affected by changes in market factors; (ii) whether such performance criteria are annual or over the life of the fund; (iii) to the extent applicable, the previous performance of each fund in relation to its performance criteria; and (iv) whether each funds’ performance related distributions are subject to contingent repayment. As a result, the impact of changes in market factors on carried interest allocation revenue will vary widely from fund to fund. An overall decrease of 10% in the general equity markets would not necessarily drive the same impact on our funds’ valuations, as many of our investments in our funds are illiquid and do not trade on any exchange. Additionally, as a large percentage of our carried interest allocation revenues are paid to employees as carried interest-related compensation, the overall net impact to our income would be mitigated by lower compensation payments. As of ~~December~~September 30, 2023, and March 31, ~~2022,~~2023, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) subject to contingent repayment, net of tax, was an estimated ~~$260.7~~$271.9 million ~~net of tax,~~and $264.1 million, respectively, assuming the fair value of all investments was zero, a possibility that we view as remote. The primary driver for the change in the contingent repayment between periods is due to additional carried interest allocation realizations in fiscal 2024 that are potentially subject to clawback.

•Investment income changes in relation to realized and unrealized gains and losses of the underlying investments in our funds in which we have a general partner commitment. Based on investments (excluding legacy Greenspring investments in ~~funds)~~funds and investments of Consolidated Funds) held as of ~~December~~September 30, 2023 and March 31, ~~2022,~~2023, we estimate that a 10% decline in fair value of the investments in funds ~~and investments, at fair value, of Consolidated Funds~~ would result in a ~~$12.3 million~~ decrease in ~~income.~~investment income of $13.0 million and $11.5 million, respectively.

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Exchange Rate Risk

Our business is affected by movements in the exchange rate between the U.S. dollar and non-U.S. dollar currencies in respect of revenues and expenses of our foreign offices that are denominated in non-U.S. dollar currencies and cash and other balances we hold in non-functional currencies. The amount of revenues and expenses attributable to our foreign offices is not material in relation to our U.S. offices. Therefore, changes in exchange rates are not expected to materially affect our condensed consolidated financial statements.

Certain of our focused commingled funds and SMAs hold investments denominated in non-U.S. dollar currencies that may be affected by movements in the exchange rate between the U.S. dollar and foreign currencies, which could affect investment performance. The currency exposure related to investments in foreign currency assets is limited to our general partner interest, which is typically no more than 1% of total capital commitments. Changes in exchange rates are not expected to materially affect our condensed consolidated financial statements.

Interest Rate Risk

As of ~~December~~September 30, 2023 and March 31, ~~2022,~~2023, we had ~~$85.0~~$125.0 million and $100.0 million, respectively, in borrowings outstanding under our Revolver. The Revolver accrues interest at a variable rate. As of ~~December~~September 30, 2023 and March 31, ~~2022,~~2023, we estimate that interest expense would increase by ~~$0.9~~$1.3 million and $1.0 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates. Based on the ~~$141.0~~$118.2 million and $103.5 million of cash, cash equivalents and restricted cash (excluding Consolidated Funds) as of ~~December~~September 30, 2023 and March 31, ~~2022 (including Consolidated Funds),~~2023, we estimate that interest income would increase by ~~$1.4~~$1.2 million and $1.0 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates.

Credit Risk

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

8378

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended ~~December 31, 2022,~~September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information required with respect to this item can be found under the heading “Litigation” in note ~~15,~~14, Commitments and Contingencies, to our condensed consolidated financial statements included elsewhere in this quarterly report, and such information is incorporated by reference into this Item 1.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part 1, Item 1A of our annual report on Form 10-K for the fiscal year ended March 31, ~~2022.~~2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~On February 7, 2023,~~(c) Trading Arrangements.

During the Board of Directors of the Company approved and adopted amended and restated bylaws of the Company to reflect the amendments summarized below (as so amended and restated, the “Amended and Restated Bylaws”), effective February 7, 2023.

~~Among other things, the amendments affected~~period covered by the Amended and Restated Bylaws: (i) update certain procedural requirements related to director nominations by stockholders in light of the recently adopted Rule 14a-19 under the Exchange Act (the “Universal Proxy Rules”), including by requiring compliance with Universal Proxy Rules, including the solicitation requirement, and requiring director candidates to consent to being named in any proxy statement; and (ii) reflect certain other changes to Sections 2.9 and 2.10 in light of the Universal Proxy Rules, including (1) clarifying that certain informational requirements applicable to stockholders and beneficial owners that are entities also encompass individuals who directly or indirectly control such entities (but not passive investors in such entities) and expanding certain informational requirements; (2) requiring any stockholder submitting a nomination notice to make a representation as to whether such stockholder intends to solicit proxies in support of director nominees other than the Company’s nominees in accordance with the Universal Proxy Rules and the Amended and Restated Bylaws and to provide evidence that the stockholder has complied with such requirements; (3) requiring director and officer questionnaires to be submitted at the same time as notice of nomination; and (4) clarifying that a failure to provide such information or comply with such solicitation requirements will result in the chairperson of the meeting disregarding a stockholder’s nomination or proposal of other business.

The Amended and Restated Bylaws also: (i) provide that a white proxy card is reserved solely for use by the Company’s Board of Directors; and (ii) update and conform various provisions to reflect amendments to the Delaware General Corporation Law (the “DGCL”), including: (1) clarifying the adjournment procedures for virtual meetings of stockholders; (2) eliminating the requirement that the list of stockholders be open to examination at meetings of stockholders; (3) ~~clarifying the requirements regarding electronic delivery of documents or information; and (4) revising the provision related to emergency bylaws to closer track Section 110 of the DGCL. The Amended and Restated Bylaws also incorporate other non-substantive, ministerial, clarifying and conforming changes, such as implementing gender-neutral terms.~~

~~The foregoing description of the Amended and Restated Bylaws is qualified in its entirety by reference to the Amended and Restated Bylaws which are filed as Exhibit 3.2 to~~ this ~~quarterly report~~Quarterly Report on Form 10-Q, ~~and incorporated herein by reference.~~none of our directors or officers (as defined in Exchange Act Rule 16a-1(f)) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

8579

Item 6. Exhibits.

Incorporated By Reference

Filed or Furnished Herewith

Incorporated By Reference

Filed or Furnished Herewith

Exhibit No.

Description of Exhibit

Form

Exhibit

Filing Date

File No.

Exhibit No.

Description of Exhibit

Form

Exhibit

Filing Date

File No.

3.1

Amended and Restated Certificate of Incorporation of StepStone Group Inc.

8-K

3.1

9/18/2020

001-39510

3.1

Amended and Restated Certificate of Incorporation of StepStone Group Inc.

8-K

3.1

9/18/2020

001-39510

3.2

Amended and Restated Bylaws of StepStone Group Inc.

3.2

Amended and Restated Bylaws of StepStone Group Inc.

10-Q

3.2

2/09/2023

001-39510

10.1

Option Agreement, dated November 2, 2022

8-K

10.1

11/3/2022

001-39510

10.1†

Consulting Services Agreement, effective as of August 1, 2023, by and among StepStone Group Inc., StepStone Group LP, MMAR HNL, LLC and Monte Brem

10-Q

10.2

8/07/2023

001-39510

10.2†

Form of Restricted Stock Unit Award Agreement under the 2020 Long-Term Incentive Plan

10.2†

StepStone Group Inc. 2023 Employee Stock Purchase Plan

S-8

99.3

9/18/2023

333-274556

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial information from our quarterly report on Form 10-Q for the quarter ended December 31, 2022 formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (Loss); (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.

101

The following financial information from our quarterly report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (Loss); (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; (vi) Notes to Condensed Consolidated Financial Statements; and (vii) Part II, Item 5(c).

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†

Indicates a management contract or compensatory plan or arrangement.

†

Indicates a management contract or compensatory plan or arrangement.

8680

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~February 9,~~November 7, 2023.


						STEPSTONE GROUP INC.

			By:			/s/ Johnny D. Randel
						Johnny D. Randel
						Chief Financial Officer
						(Principal Financial Officer and Authorized Signatory)

8781


	As of March 31, 2022
	Level I		Level II		Level III		Total








Liabilities
Contingent consideration obligations	$	—	$	—	$	28,025	$	28,025
Total liabilities	$	—	$	—	$	28,025	$	28,025


	Number of RSUs	Weighted-Average Grant-Date Fair Value Per RSU
Balance as of March 31, 2022	2,087,324	$	20.40
Granted	16,429	$	28.91
Vested	(597,698)	$	(18.49)
Forfeited	(34,073)	$	(21.89)
Balance as of December 31, 2022	1,471,982	$	21.36


	Three Months Ended December 31, 2021		Nine Months Ended December 31, 2021

Revenues	$	410,465		$	1,505,300
Net income attributable to StepStone Group Inc.	48,346			134,181